Late last year, Consumerist reported on a string of debt collectors paying to use prosecutors’ letterheads as a way to intimidate consumers into paying their debts. While the company facing the wrath of the Consumer Financial Protection Bureau today didn’t exactly pay to use the letterhead, they allegedly used the documents in a deceptive manner to get consumers to enroll in costly financial education programs.
According to the CFPB complaint [PDF], between 2009 and 2014 National Corrective Group masqueraded as prosecutors and used deceptive tactics to intimidate consumers into paying hundreds of dollars in fees to avoid supposed jail time.
The California-based operation, along with Victim Services Inc. and American Justice Solutions, Inc., make up the largest administrators of bad check diversion programs in the United States.
Check diversion programs are often offered by state and district attorneys’ office to consumers accused of writing bad checks as a way to avoid criminal prosecution.
National Corrective Group administered these programs on behalf of state and local prosecutors’ offices and collected check debt from consumers on behalf of retail merchants in Maryland, Colorado, California, Florida, Michigan, New Mexico, Nevada, Illinois, Indiana, Iowa and Pennsylvania.
Under the law, a company operating a bad check diversion program cannot contact a consumer about the program until a prosecutor’s office has reviewed the case and determined the consumer is eligible.
But, according to the CFPB complaint, that’s not how National Corrective Group operated.
Instead the company allegedly deceived consumers by sending them notices on prosecutors’ letterhead – creating the false impression that consumers may be prosecuted for writing bounced checks – before their cases were ever reviewed by the proper authorities.
“The CFPB alleges that less than one percent of consumers who received final warning letters stating that their case was being forwarded for possible criminal prosecution were ever even referred to the prosecutor’s office for possible prosecution,” the Bureau says in a statement. “The Bureau alleges that the company also threatened possible criminal prosecution where the amount of the debt was so low that criminal action would rarely or never occur.”
Additionally, National Corrective Group told consumers that to qualify for the diversion program and avoid prosecution they must pay the bounced check debts as well as enroll in the company’s financial education class for an additional fee, which typically cost about $200.
Under the proposed order, National Corrective Group must end its deceptive communications to consumers, stop using threats of intimidation or imprisonment, stop using district attorneys’ letterhead and must pay a $50,000 civil fine to the Bureau.
CFPB Takes Action Against “Bad Check” Debt Collector [Consumer Financial Protection Bureau]
by Ashlee Kieler via Consumerist