Bad check restitution program

Last updated

A bad check restitution program (BCRP) is a program in the United States that works to retrieve funds from bad check writers in order to repay moneys owed to the recipients of the checks. In other words, these are debt collection operations. Many of these programs are operated by private companies that add fees that may exceed $200, regardless of the amount of the check. They call these operations "bad check enforcement," or "bad check restitution," or "bad check diversion." Sometime, these programs are actually run in house by real prosecutors. The private companies send check writers letters which state basically, that to avoid being prosecuted, the check writer may enroll in an expensive diversion program. In most instances, the prosecution threats are false and made only to coerce payment of high fees.

Contents

In the US very few states have laws that specifically permit district attorneys to allow private collection agencies to collect checks in the district attorney's name. About half of all U.S. states offer some type of Bad Check Restitution Program, and these services vary in many ways. Some accept non-sufficient funds (NSF), [1] and closed account checks while others may accept stopped payment checks and markers. It will also be noted that most have time limits (checks may need to be less than 90 or 180 days old and most need to be at least 30 days old and have had to have notice to check maker that the check has been returned unpaid with a demand for payment in a specified time). Some will not accept checks that were written under certain circumstances, including a post-dated check, one that the check writer asked the recipient to hold, or one that was written as an extension of credit. [2]

Methods

A Bad Check Diversion Program generally pursues the bad check writer by stating (typically from the local District Attorney's office) that the check writer has committed a criminal act, and is subject to prosecution. The check writer is told that s/he may avoid prosecution by meeting the guidelines of the program, which generally include the payment of all monies owed to the victim, a program fee, and in some jurisdictions, participation in a course designed to improve the check writer's habits.

Typically, the letters are sent to the check writer without a prosecutor ever having reviewed any evidence or considered whether the check writer committed a crime. These are highly automated operations in which large retailers and collection agencies transmit masses of computer data directly to the private company that is trying to collect the check, using the prosecutor's name and authority. Generally, enrollment in the program is not an admission of guilt to a crime, and will not result in criminal charges being filed or a criminal record. The check writer is told that if s/he successfully completes all program requirements, the case against him/her dismissed without any possibility of arrest, criminal charges or a record thereafter.

Bad Check Restitution Programs compete directly with private collection agencies. They claim that they can recover more successfully than private collection agencies, because they have "the power of the DA brand." They help businesses recover hundreds of thousands of dollars each year throughout the United States. Most Prosecutor offices try to make these programs free to taxpayers (i.e. bad check collection is funded by fees paid by bad check writers).

Criticism of BCRPs

According to law enforcement agencies and district attorneys, BCRPs are diversion programs operated by the county, state, or other jurisdiction that are responsible for collecting funds owed to victims.[ citation needed ] They claim the purpose is to recover the losses of the victims.

Many consumer advocates oppose the actions of BCRPs, particularly those operated by private, for-profit companies, stating that bad check writing is not a crime unless the check writer actually intended to defraud the recipient. The writer of the bad check is told that the use of the program is optional, but is falsely threatened that the options are to participate, or risk going to jail. The writer is usually informed within the letter that entering the program is not necessary, and it is permissible to stand trial, even though no charges have been, or are likely to be filed.

Sometimes the program is handled internally by the law enforcement agency itself, which often generates a substantial portion of its overall budget from the check fees that it collects.[ citation needed ] In many cases, the law enforcement agency signs up with a private collection agency. The private company essentially pays the law enforcement agency a small portion of the fees it collects in exchange for permission to send demand letters on official law enforcement agency letterhead and to threaten to prosecute check writers who do not pay up to $200 in fees, plus the check itself. This is when, in most instances, there is no criminal case to dismiss, and no law enforcement official has reviewed the check writer's file to even determine if there is/was evidence of a crime.[ citation needed ]

These programs have been criticized in news journals across the country as being unfair, unethical, predatory and possibly illegal. [3] [4] [5] [6] In 2013 in Massachusetts, the prosecutors who used these programs suspended their operations when questions were raised in a Boston Globe investigation. [7] In November 2014, the American Bar Association issued a Formal Opinion, finding that it was unethical for prosecutors to allow these companies to use prosecutor letterhead, because it was "abusive" to convey "the impression that the machinery of the criminal justice system has been mobilized" against the consumer, who is led to believe that he or she may face jail time unless the collector gets paid. [8]

Lawsuits against BCRPs

In most states, it is not a crime to write a check that does not clear, unless at the time the check is written, the check writer knows that it will not clear, and is intending to defraud the merchant. Criminal intent may be determined by circumstantial evidence, such as an established pattern of writing bad checks and not paying them, or writing a series of checks on a closed account. The check writer's explanation for why the check did not clear must be considered in deciding whether there was criminal intent.

A number of lawsuits have been filed challenging the legality of these programs. In a lawsuit in Iowa, the check diversion company agreed to refund money to class members. [9] A federal court in Michigan ruled that the private company was violating the Fair Debt Collection Practices Act by using district attorney letterhead and falsely threatening consumers with arrest. [10] A federal court in Sacramento, California ruled that the person who ran the private company violated the Fair Debt Collection Practices Act and California law by charging unlawful fees, pretending to be the district attorney's office and making false threats to have check writers arrested., [11] and later awarded about $750,000 in damages. A federal court in San Jose, California ruled that the two individuals that made millions from the company they owned had violated both the Fair Debt Collection Practices Act and the California Unfair Competition Law by charging fees for a diversion class and imposing other fees, by impersonating the district attorney's office in their communications with check writers, and by falsely claiming that check writers who did not pay those fees would be prosecuted. [12] After a trial in which both the plaintiffs and defendants complained about the verdict, the judge in the case vacated the parties later settled for an undisclosed sum. In another California case, the federal court in San Francisco approved a $3,250,000 settlement. [13] In 2014, a new lawsuit was filed against in Washington, alleging violations of the Fair Debt Collection Practices Act and the Washington Consumer Protection Act. [14] In December 2014, consumers filed a lawsuit against Corrective Solutions in California. [15] Then, in March 2015, the Consumer Financial Protection Bureau filed a lawsuit against National Corrective Group, Inc. and related entities, and obtained a consent order prohibiting these companies from masquerading as the prosecutor and making phony prosecution threats. [16]

See also

Related Research Articles

<span class="mw-page-title-main">Dishonoured cheque</span> Cheque that a bank declines to pay

A dishonoured cheque is a cheque that the bank on which it is drawn declines to pay (“honour”). There are a number of reasons why a bank might refuse to honour a cheque, with non-sufficient funds (NSF) being the most common, indicating that there are insufficient cleared funds in the account on which the cheque was drawn. An NSF check may be referred to as a bad check, dishonored check, bounced check, cold check, rubber check, returned item, or hot check. Lost or bounced checks result in late payments and affect the relationship with customers. In England and Wales and Australia, such cheques are typically returned endorsed "Refer to drawer", an instruction to contact the person issuing the cheque for an explanation as to why it was not paid. If there are funds in an account, but insufficient cleared funds, the cheque is normally endorsed “Present again”, by which time the funds should have cleared.

<span class="mw-page-title-main">Fair Debt Collection Practices Act</span> U.S. consumer protection law

The Fair Debt Collection Practices Act (FDCPA), Pub. L. 95-109; 91 Stat. 874, codified as 15 U.S.C. § 1692 –1692p, approved on September 20, 1977, is a consumer protection amendment, establishing legal protection from abusive debt collection practices, to the Consumer Credit Protection Act, as Title VIII of that Act. The statute's stated purposes are: to eliminate abusive practices in the collection of consumer debts, to promote fair debt collection, and to provide consumers with an avenue for disputing and obtaining validation of debt information in order to ensure the information's accuracy. The Act creates guidelines under which debt collectors may conduct business, defines rights of consumers involved with debt collectors, and prescribes penalties and remedies for violations of the Act. It is sometimes used in conjunction with the Fair Credit Reporting Act.

<span class="mw-page-title-main">Fair Credit Reporting Act</span> U.S. federal legislation

The Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., is federal legislation enacted to promote the accuracy, fairness, and privacy of consumer information contained in the files of consumer reporting agencies. It was intended to shield consumers from the willful and/or negligent inclusion of erroneous data in their credit reports. To that end, the FCRA regulates the collection, dissemination, and use of consumer information, including consumer credit information. Together with the Fair Debt Collection Practices Act (FDCPA), the FCRA forms the foundation of consumer rights law in the United States. It was originally passed in 1970, and is enforced by the U.S. Federal Trade Commission, the Consumer Financial Protection Bureau, and private litigants.

A background check is a process used by an organisation or person to verify that an individual is who they claim to be, and check their past record to confirm education, employment history, and other activities, and for a criminal record. The frequency, purpose, and legitimacy of background checks vary among countries, industries, and individuals. An employment background check typically takes place when someone applies for a job, but it can also happen at any time the employer deems necessary. A variety of methods are used to complete these checks, including comprehensive database search and letters of reference.

<span class="mw-page-title-main">Refund anticipation loan</span>

Refund anticipation loan (RAL) is a short-term consumer loan in the United States provided by a third party against an expected tax refund for the duration it takes the tax authority to pay the refund. The loan term was usually about two to three weeks, related to the time it took the U.S. Internal Revenue Service to deposit refunds in electronic accounts. The loans were designed to make the refund available in as little as 24 hours. They were secured by a taxpayer's expected tax refund, and designed to offer customers quicker access to funds.

<span class="mw-page-title-main">2004 California Proposition 64</span> Referendum on lawsuits

Proposition 64 was a California ballot proposition on the November 2, 2004 ballot. It passed with 6,571,694 (59.0%) votes in favor and 4,578,725 (41.0%) against. It was an initiative statute that limited the California law on unfair competition, restricting private lawsuits against a company only to those where an individual is injured by and suffers a financial loss due to an unfair, unlawful, or fraudulent business practice and providing that otherwise only public prosecutors may file lawsuits charging unfair business practices.

<span class="mw-page-title-main">Debt collection</span> Pursuit of debt payments owed by an individual or business

Debt collection or cash collection is the process of pursuing payments of money or other agreed-upon value owed to a creditor. The debtors may be individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed. Historically, debtors could face debt slavery, debtor's prison, or coercive collection methods. In the 21st century in many countries, legislation regulates debt collectors, and limits harassment and practices deemed unfair.

Debt settlement is a settlement negotiated with a debtor's unsecured creditor. Commonly, creditors agree to forgive a large part of the debt: perhaps around half, though results can vary widely. When settlements are finalized, the terms are put in writing. It is common that the debtor makes one lump-sum payment in exchange for the creditor agreeing that the debt is now cancelled and the matter closed. Some settlements are paid out over a number of months. In either case, as long as the debtor does what is agreed in the negotiation, no outstanding debt will appear on the former debtor's credit report.

Fair debt collection broadly refers to regulation of the United States debt collection industry at both the federal and state level. At the Federal level, it is primarily governed by the Fair Debt Collection Practices Act (FDCPA). In addition, many U.S. states also have debt collection laws that regulate the credit and collection industry and give consumer debtors protection from abusive and deceptive practices. Many state laws track the language of the FDCPA, so that they are sometimes referred to as mini-FDCPAs.

The United States Food and Drug Administration (FDA) Office of Criminal Investigations (OCI) provides the FDA with a specific office to conduct and coordinate its criminal investigations.

A debt buyer is a company, sometimes a collection agency, a private debt collection law firm, or a private investor, that purchases delinquent or charged-off debts from a creditor or lender for a percentage of the face value of the debt based on the potential collectibility of the accounts. The debt buyer can then collect on its own, utilize the services of a third-party collection agency, repackage and resell portions of the purchased portfolio, or use any combination of these options.

<span class="mw-page-title-main">Lori Swanson</span> American politician

Lori Swanson is an American lawyer and politician who served as the attorney general of Minnesota from 2007 to 2019. She was the first female attorney general elected in Minnesota. In 2018, she ran for Governor of Minnesota with running mate U.S. Representative Rick Nolan finishing in third place in the Democratic-Farmer-Labor primary.

<span class="mw-page-title-main">Missouri Attorney General</span> Attorney general for the U.S. state of Missouri

The Office of the Missouri Attorney General was created in 1806 when Missouri was part of the Louisiana Territory. Missouri's first Constitution in 1820 provided for an appointed attorney general, but since the 1865 Constitution, the Attorney General has been elected. As of January 2023, there have been 44 attorneys general in Missouri.

<span class="mw-page-title-main">Indiana Attorney General</span> Attorney general for the U.S. state of Indiana

The Indiana Attorney General is the chief legal officer of the State of Indiana in the United States. Attorneys General are chosen by a statewide general election to serve for a four-year term. The forty-fourth and current Attorney General is Todd Rokita.

A diversion program, also known as a pretrial diversion program or pretrial intervention program, in the criminal justice system is a form of pretrial sentencing that helps remedy the behavior leading to the arrest. Administered by the judicial or law enforcement systems, they often allow the offender to avoid conviction and include a rehabilitation program to prevent future criminal acts. Availability and the operation of such systems differ in different countries.

Forum, formerly known as the National Arbitration Forum (NAF) is an American organization that provides arbitration and mediation services to businesses, based at its Minneapolis headquarters and offices in New Jersey. The organization was founded in 1986. As of 2008, the National Arbitration Forum administered over 200,000 cases a year, most of which were consumer debt collection cases. In 2009, the National Arbitration Forum ceased administration of new consumer arbitrations as part of a consent decree with the Attorney General of Minnesota Lori Swanson concerning the NAF's ties with debt collection firms. The company maintains a panel of over 1,600 arbitrators and mediators who are attorneys and former judges located across the United States and in 35 countries around the world. Panelists arbitrate and mediate the disputes.

Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent businesses from engaging in fraud or specified unfair practices to gain an advantage over competitors or to mislead consumers. They may also provide additional protection for the general public which may be impacted by a product even when they are not the direct purchaser or consumer of that product. For example, government regulations may require businesses to disclose detailed information about their products—particularly in areas where public health or safety is an issue, such as with food or automobiles.

Encore Capital Group, Inc. is a publicly traded debt buyer based in the United States. The company is headquartered in San Diego, and operates throughout the United States. The firm is a publicly traded NASDAQ Global Select company (ECPG), a component stock of the Russell 2000, the S&P SmallCap 600, and the Wilshire 4500.

<span class="mw-page-title-main">Government of Alameda County, California</span>

The government of Alameda County, California, is defined and authorized under the California Constitution, California law, and the Charter of the County of Alameda. Much of the Government of California is in practice the responsibility of county governments such as the Government of Alameda County. The County government provides countywide services such as elections and voter registration, law enforcement, jails, vital records, property records, tax collection, public health, and social services. In addition the County serves as the local government for all unincorporated areas. County services are provided to residents by more than 9,000 employees working in 21 different agencies and departments with an annual budget expenditure of $2.4 billion.

Sentinel Offender Services is a criminal justice services and original equipment manufacturing company based in Anaheim, California. The company was founded in 1993 by Robert Contestabile, who is currently the chairman. Tom Flies is chief executive officer.

References

  1. ↑ "NSF Fees". Archived from the original on 2013-02-15.
  2. ↑ LA Crime Report07.pub Archived 2007-09-27 at the Wayback Machine
  3. ↑ Silver-Greenberg, Jessica (2012-09-15). "In Prosecutors, Debt Collectors Find a Partner". The New York Times. ISSN   0362-4331 . Retrieved 2023-02-22.
  4. ↑ Checkmate-Check Collectors and Prosecutors Terrorize Consumers, http://www.ocweekly.com/2013-01-24/news/corrective-solutions-san-clemente-orange-county-district-attorney/
  5. ↑ DA's Letters to Debt Collectors Raise Ethical Questions, http://www.calbarjournal.com/November2012/EthicsByte.aspx
  6. ↑ Secret, Mosi (2 March 2009). "Bounced Checks: How Local District Attorneys Get a Cut of the Debt Collection Business". ProPublica. Retrieved 2023-02-22.
  7. ↑ "Facing questions, DAs suspend outsourcing of bad check cases - The Boston Globe". BostonGlobe.com. Retrieved 2023-02-22.
  8. ↑ ABA Issues Formal Ethics Opinion on Prosecutors Who Rent Out their Letterhead to Debt Collectors, http://pubcit.typepad.com/clpblog/2014/11/aba-issues-formal-ethics-opinion-on-prosecutors-who-rent-out-their-letterhead-to-debt-collectors.html
  9. ↑ Liles v. American Corrective Counseling, Inc.
  10. ↑ Gradisher v. Check Enforcement Unit, Inc., 210 F. Supp. 2d 907 (W.D. Mich. 2002),
  11. ↑ Schwarm v. Craighead, 552 F. Supp. 2d 1056 (E.D. Cal. 2008)
  12. ↑ Del Campo v. Am. Corrective Counseling Serv., 718 F. Supp. 2d 1116 (N.D. Cal. 2010)
  13. ↑ Smith v. Levine Leitchman Capital Partners, et al. Civ. No. 10-0010 (N.D. Cal.) and Shouse v. National Corrective Group, Inc., Civ. No. 10-0175
  14. ↑ Cavnar v. Bounceback, Inc., Civ. No. 2:14-cv-0235 (E.D. WA) See also, http://q13fox.com/2014/07/31/shady-collection-company-agency-teams-up-with-prosecutors-office-harasses-struggling-mother-for-cash/.
  15. ↑ Breazeale v. Victim Services, Inc., et al. Civ. No. 3:14-cv-05266 (N.D. Cal).
  16. ↑ See CFPB press release, http://www.consumerfinance.gov/newsroom/cfpb-takes-action-against-bad-check-debt-collector/.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.