Cosigner Notice Failures: The $38 Million Bad Boys Settlement and the $4.5 Million Bail Hotline Deal

For most of the bail industry’s history in California, the payment plan was the easy part of the transaction. A family member put down a portion of the premium, signed for the balance and made monthly payments. If the payments stopped, the agency called, sent letters and, in some cases, sued. Two cases have changed how that paperwork has to be handled, and how much it can cost an agency to get it wrong.

The first is the Bad Boys Bail Bonds litigation, which ended in 2026 with the company permanently barred from collecting an estimated $38 million in cosigner debt. The second is Abeyta v. DMCG, Inc., a federal class action against Bail Hotline Bail Bonds that settled for $4.5 million in cash. Both turned on the same short consumer-protection statute: the “Notice to Cosigner” requirement in California Civil Code section 1799.91.

This article explains what the statute requires, how the courts came to apply it to bail premium financing, what the two settlements contain and what agents should take from them. It is general information for industry readers, not legal advice. Agencies should review their own contracts with California counsel and their surety.

The Statute Behind Both Cases

Section 1799.91 is not a bail law. The Legislature adopted it decades ago for consumer credit generally, after finding that many people who cosign a debt think they are vouching for someone’s character rather than taking on the debt themselves.

The rule is simple to state. When a creditor gets more than one person’s signature on a consumer credit contract, it must deliver a specific notice to each signer who does not personally receive the money, property or services being financed. The notice must be delivered before that person becomes obligated, in a clear and conspicuous manner. The required text begins: “You are being asked to guarantee this debt. Think carefully before you do. If the borrower doesn’t pay the debt, you will have to.” It goes on to warn that the cosigner may owe the full amount plus late fees or collection costs, that the creditor can collect from the cosigner without first trying the borrower, that the same collection methods can be used, and that a default may appear on the cosigner’s credit record. It ends: “This notice is not the contract that makes you liable for the debt.”

The language requirement has grown. Senate Bill 633, signed in August 2022, removed the old exception for spouses and expanded the notice from English and Spanish to English plus the languages listed in Civil Code section 1632: Spanish, Chinese, Tagalog, Vietnamese and Korean. If a contract is written in another language, the notice must also be given in that language. The Department of Financial Protection and Innovation publishes official translations of the notice. The statute allows the notice on a separate sheet or within the contract, subject to its formatting requirements.

The consequence of skipping it is what made these cases expensive. Under Civil Code section 1799.95, no action may be brought and no security interest enforced on a noncompliant contract against a person who was entitled to the notice and did not receive the money, property or services. In practical terms, a cosigner who never got the notice may owe the agency nothing on that financing agreement.

How the Courts Got There: BBBB Bonding Corp. v. Caldwell

The question was whether a bail premium payment plan is “consumer credit” at all. The industry’s position had been that bail is a heavily regulated insurance product, and that the Insurance Code and Department of Insurance rules are the whole of the law governing it.

In BBBB Bonding Corp. v. Caldwell (2021) A162453, the First District Court of Appeal disagreed. The facts were ordinary. Kiara Caldwell signed for a friend’s $50,000 bail. The premium was $5,000, or 10 percent. She agreed to pay $500 down and the remaining $4,500 in $450 monthly installments. She also signed an indemnity agreement with the surety. After the down payment, she could not keep up. According to the opinion, collection calls followed to her phone, her mother and her workplace, and in October 2019 the agency sued her for the balance. She responded with a class action cross-complaint.

The court drew a line that every agency should understand. The indemnity agreement protects the surety. The premium financing agreement is a separate contract between the agency and the person paying over time, and it extends credit so a family can pay the premium in installments. That, the court held, makes it a consumer credit contract under Civil Code section 1799.90, and the cosigner notice applies. The court also rejected the argument that the statute did not apply because the agency had each signer sign a separate but essentially identical document.

Two points from the decision matter for day-to-day work. The ruling did not say bail premiums are refundable, and it did not disturb the idea that a premium is generally fully earned once the defendant is released. It addressed who can be made to pay the financed balance and what must happen first.

The Bad Boys Settlement

The Court of Appeal affirmed a preliminary injunction in December 2021. The class case continued in Alameda County Superior Court until Judge Patrick McKinney granted final approval of a settlement on January 20, 2026, with judgment entered the next day. The plaintiffs’ counsel, the Lawyers’ Committee for Civil Rights of the San Francisco Bay Area and Keker, Van Nest & Peters, announced the result in February 2026.

As described by counsel and in the judgment:

Bad Boys did not admit the allegations by settling, and readers should treat the factual claims in press releases as the plaintiffs’ account. But the remedy itself is not in dispute. For one agency, a decade of receivables on cosigned payment plans is gone.

The Bail Hotline Settlement

Abeyta v. DMCG, Inc. followed the same theory against a different company. Robert Abeyta, an Oakland resident, filed suit in October 2022, alleging he signed financing documents for a friend’s non-refundable bail premium without receiving the required notice. The case was removed to federal court and assigned to Judge Susan Illston in the Northern District of California (No. 3:22-cv-07089-SI). The court denied the company’s motion to dismiss for improper venue in 2023.

The parties reached a $4.5 million settlement covering California cosigners who did not receive a Notice to Cosigner and who made payments on or after October 3, 2018, or were sent a “Settlement Offer Letter” on or after October 3, 2021. The class definitions reflected the law before SB 633, which is why the settlement was limited to non-spouse cosigners. The official settlement website reports final approval on May 2, 2025, with payments distributed in installments between 2026 and 2029.

Where Bad Boys centered on wiping out uncollected debt, Bail Hotline is a reminder that money already collected can also be at stake. Plaintiffs in these cases typically seek restitution of payments made on unenforceable contracts.

What the Notice Requires in Practice

Reduced to an office procedure, the statute asks for five things:

A Practical Checklist for Agents

For a broader operational plan that covers collections and pricing conversations, read our compliance playbook after the settlements.

The Business Consequences

The obvious cost is the write-off. An agency that financed premiums for years without the notice may be carrying receivables it cannot lawfully collect from cosigners. The less obvious costs add up: restitution of past payments, plaintiffs’ attorney fees, settlement administration, years of monitoring, staff time and the reputational damage of a public case. Our earlier look at the hidden costs of low-down premium financing becomes more pointed when part of that financing may be unenforceable.

There is also a lending question. If a cosigner’s promise cannot be enforced, the agency is effectively extending unsecured credit to the defendant alone. That should change how agencies underwrite payment plans, a topic covered in our analysis of what these cases mean for the commercial bail business model.

Outlook

Expect more of these cases. The appellate decision is published, the statute is short and the plaintiffs’ bar now has a template and two public results. Agencies with large payment-plan books and aggressive collection histories are the most exposed. Consumer advocates have also put the issue before regulators, and the Attorney General and Department of Insurance filed an amicus brief supporting the cosigner in Caldwell.

The good news is that compliance is cheap compared with the alternative. A one-page notice, delivered first and documented properly, is the difference between an enforceable payment plan and a liability. Agencies that already do this have a real edge. They can collect what they are owed, show regulators a clean file and tell families honestly what they are signing.

Case and statute references

Court opinions and settlement documents open on court, counsel or settlement-administrator websites; statutes open on the California Legislature’s official site. Laws and settlement terms change, so confirm current text before relying on it.