Checkmate

Prosecutors team with debt collectors to terrorize consumers in ways both highly profitable and usually illegal.

Corrective Solutions paid handsomely for the bill. Between 2003 and 2006, the company spent more than $660,000 on lobbying. It also slathered donations on key senators like Connecticut Democrat Christopher Dodd, who would later leave office after accepting a sweetheart deal from a mortgage company.

The exemption essentially allowed companies like Corrective Solutions, BounceBack and Check Diversion Program to operate above the law. They can send out notices on DA letterhead, threaten people with jail time and rake in upwards of $200 in fines per person. And it's all perfectly legal.

"While the rest of us are playing by the rules, they aren't," Schiffman says.

Julie Orr bounced a $91 check at a grocery store, but was hounded for more than $300 by a private collections agency.
Rodrigo Pena
Julie Orr bounced a $91 check at a grocery store, but was hounded for more than $300 by a private collections agency.
Adam Levin, former consumer affairs commissioner of New Jersey and owner of Credit.com.
Adam Levin, former consumer affairs commissioner of New Jersey and owner of Credit.com.

Consumer advocates and legal experts were naturally horrified. "You don't hand out guns and badges to just anyone," says Adam Levin, the former consumer-affairs commissioner of New Jersey. "And this is effectively creating a gun-and-badge situation for people who frankly not only don't deserve it, but have a long history of abusing it."

Paul Arons, a Washington state consumer-rights lawyer, agrees. What's startling, he says, isn't the shady tactics of companies like Corrective Solutions; it's the fact that district attorneys, charged with protecting the public good, are abetting the deception.

"Check collectors have a long history of running scams like pretending they'll have people arrested, or that they are with government agencies," Arons says. "I was shocked to find out that prosecutors were actually authorizing check collectors to do this in district attorneys' names."

Congress did include a small caveat in the 2006 bill that was supposed to protect citizens. "The prosecutor must determine that probable cause exists to charge a person with a crime before the program sends the letter," Levin says. Unfortunately, they're universally blowing this off.

Take the Riverside DA's office. Chief Deputy Vicki Hightower says her program is meant to target bad-check writers who intend to defraud victims, not well-meaning people who accidentally bounce a check.

"We understand the concerns people have," Hightower says. "That's why we review the checks before they go to Corrective Solutions. And while the correspondence that goes out has our logo, it does say that the program is administered by a third-party vendor."

Yet her words don't appear to match the facts on the ground. In order to open a bad-check case in Riverside, merchants only need to provide the check writer's information, along with the promise that they tried contacting them at least once. But Riverside's own records show that it is routinely threatening jail time for people who've done nothing criminal.

During the first 10 months of 2012, Corrective Solutions sent out 8,973 letters on Riverside's behalf. Just 23 of those cases were deemed worthy of prosecution.

Florida's Miami-Dade County is even more lax. There, merchants' complaints go directly to Corrective Solutions, which then decides which ones merit prosecution.

"Our office has set the intake criteria for checks to be accepted into the program," says Assistant State Attorney Marie Jo Toussaint. "This criteria insures that only checks which have violated our Florida statutes are eligible for this pre-arrest diversion program."

Again, the records say otherwise. Of the 1,863 cases opened by Corrective Solutions, only 106 were actually filed in criminal court.

"There is no question that defrauding someone is a crime," says Kara Dansky, an ACLU lawyer. "But in these circumstances, there is no evidence that's what happened. People could have written a check on accident, with no intent to defraud. But the DA isn't investigating that. ... Instead, debt-collection companies are using the auspices of the DA's office to threaten someone with jail when there is no investigation."


Bankruptcy: The Industry's Double Standard

Corrective Solutions had good reason to buy immunity from Congress. At the time, the industry was losing one class-action lawsuit after another.

In 2004, Kristy Schwarm was a stay-at-home mother of five in Ukiah, California, with another child on the way. Over the course of one week, Schwarm wrote a check to Walmart for $69.26 and one to FoodMaxx for $83.41, and made an ATM withdrawal, according to court records.

Unfortunately, the ATM withdrawal overdrew her account, racking up seven rejected checks and 21 overdraft fees totaling $560. "It had a snowball effect, leaving the account continually overdrawn, even though I made several deposits," Schwarm says in court documents. Her bank erased most of the fees.

But a few months later, Schwarm received a letter from the Mendocino County district attorney. She'd been accused of fraud and was ordered to repay the checks, along with penalties and a "diversion fee."

"I was in a panic," Schwarm said in court documents. "I had never been in trouble with the law before. ... I assumed that I must be in a lot of trouble if I was getting a letter from the district attorney that I could be arrested."

Schwarm called the number on the letter, assuming she was speaking with someone from the DA's office. She promised to pay as soon as she could. But with her husband out of work and eight mouths to feed, she just kept falling further behind. A year later, she still hadn't paid her debts. The letters and phone calls kept coming.

Then she was pulled over in a traffic stop with her six kids in the car. Schwarm was sure it had to do with the letters. "I was terrified. I thought ... my children were going to see me get handcuffed and taken away. I was giving my children instructions on calling their father to come pick them up when I found out that I was just being warned for not coming to a complete stop at an intersection."

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6 comments
scottindallas
scottindallas topcommenter

So, Is Unfair Park dead?  Maybe it's my browser, but this thing seems all screwy.  


Anyway, this goes to my point about utilities, they are distinct markets from free markets, and privateering in them can be quite pernicious.  Gov't need to do what it do, and stay out of truly free markets, and concern itself only with crimes against people. 

elizabethcmorgan
elizabethcmorgan

If you think this is bad, you should talk to individuals in Texas who've been convicted of a minor drug offense, a DWI, or DUI. Ankle monitor companies, Interlock devices, specialty courts, special counseling groups, none of it optional. Refusal means the offender goes to jail. It is a big money business for both private enterprise and city-county-state government (you KNOW they are making a little money somewhere or they wouldn't hook up with these scheisters). Some offenders are on the hook to the county or the state for thousands of dollars every month--no wonder recidivism is so high. And if you fail to keep up this high debt, probation is revoked and you go to a privatized prison where there is no motivation to get you out and back into society. You're worth more to the state of Texas as a prisoner than a tax-paying citizen! It is a national disgrace! If people only knew the stories of these poor souls who had one lapse in judgement and the consequences and repercussions are enormous.

julipo
julipo

How insane is it that our so-called representatives allow this to go on? They should burn this whole sham industry to the ground. The companies who push those red-light cameras have the same agenda. They can talk about public safety all they want, but everyone knows it's all about the Benjamins.

dfwenigma
dfwenigma

It's time to hold our district attorney's responsible for their actions. This type of behavior should be unconscionable but it's not. It's perfectly legal and acceptable. Everyone's on the take here. Let me be more frank - even if they're not taking payoffs from the debt collection industry their election campaigns take contributions - whether straw or direct - and these can then, in some cases, be cash in the pocket of the elected official. Shame on them.

kergo1spaceship
kergo1spaceship

the only two Orr's I care about is Ben Orr, the great, departed bassist of The Cars, and the GREAT Bobby Orr-#4, the man who scored 146 points, AS A DEFENSEMEN. The best two way player ever!

TheCredibleHulk
TheCredibleHulk topcommenter

Interesting article.


I think I'll go check my checking acct. balance...

 
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