Checkmate: Who's Letting Debt Collectors Terrorize Consumers

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Illustration by Brian Stauffer.


Julie Orr has plenty of reasons to bounce a check.

In just a few years, she's gone from running a successful advertising business to being a single mom on disability. Hers is a dilemma of American life: A leg injury keeps her from working, but she can't afford the surgery without health insurance.

Former N.J. Consumer Affairs Commissioner Adam Levin thinks costly financial responsibility classes are “garbage.”
Courtesy of Adam Levin
Former N.J. Consumer Affairs Commissioner Adam Levin thinks costly financial responsibility classes are “garbage.”
Carole Hirth thought she was being threatened with fraud charges by Cook County. Instead, it was debt collection agency Corrective Solutions.
Photo by Will Rice
Carole Hirth thought she was being threatened with fraud charges by Cook County. Instead, it was debt collection agency Corrective Solutions.

Yet Orr says her woes didn't lead her to write a bum check at the grocery store. "Sure, we've fallen on tough times," says the 54-year-old from Riverside. "But I've never bounced a check before in my life. I've always been on top of my finances."

Accidentally overdrawing one's bank account isn't a crime. It is, however, a hyper-lucrative business, allowing banks to collect $30 billion a year in overdraft fees while their customers frantically swim back to the surface. Such is the bounty of faulty math.

So Orr was shocked when she received a letter from the Riverside District Attorney's Office accusing her of fraud.

In May, she wrote a check for $91 at an Albertson's grocery store. A few days later, while reviewing her bank account, she noticed that the check had bounced. Orr headed back to Albertson's to make good on her payment. But she was told that the store had already placed her in collections. It was out of the grocer's hands.

A month later, Orr received a letter from the district attorney's office. It inexplicably accused her of intent to commit fraud, noting that she was now eligible for "up to one year in the county jail." The only way to avoid criminal charges: participate in the county's "voluntary" bad-check restitution program.

"The letter really made me think I'd go to jail if I didn't," she says.

But the DA wanted more than $91 back. Though California law restricts the penalty on bad checks to $25, the letter demanded $333.51, which included $175 for a "voluntary" financial accountability class she'd have to take.

Orr didn't even consider arguing her innocence. She just wanted the problem solved. So she called the phone number on the letter to make arrangements to pay in cash at the sheriff's department. When she was told she could only send a check to a P.O. box, Orr grew suspicious.

"That's when I asked if I was actually talking to someone in the DA's office," she says. "And they said no, that they were a company being paid to represent the DA."

In fact, Orr had contacted Corrective Solutions, a private company from San Clemente. According to its website, it handles bad-check cases for 140 district attorneys nationwide — jurisdictions that oversee 65 million people, from Colorado to Florida, Michigan to Washington.

Consider it the privatizing of justice. Instead of investigating bad-check complaints, prosecutors simply pass them along to Corrective Solutions. The company then uses official DA letterhead to threaten jail time if consumers don't pay up. Corrective Solutions also runs the "voluntary" financial-accountability classes, and prosecutors get a cut of the profits while barely lifting a finger.

The entire system runs on a one-size-fits-all presumption of guilt. No one's bothering to investigate whether the check-writer was working a scam or merely suffering from a momentary lapse of mathematics.

Orr e-mailed Corrective Solutions, saying she'd be happy to repay the $91 plus a $50 fee, though she wanted to skip the "voluntary" class, which she couldn't afford.

Corrective Solutions didn't respond — but the threatening letters kept coming.

"When no one wrote me back, I'd had it," Orr says. "I'd tried everything, even calling the district attorney's office directly. No one could help me. I just don't see how this is right, or even legal."


Debtors' prisons were outlawed in 1833, when America decided it was counterproductive to imprison people for being broke. In truth, most people avoid their bills simply because they can't pay them, not because they're on the make.

"There was a [federal] study done in 1974 about why people didn't pay their debts," says Bob Hobbs, deputy director of the National Consumer Law Center. "And the number of people who could but didn't pay their debts was 0.4 percent. ... The most typical reasons were they lost their jobs, got divorced. Some overspent, but were encouraged to. Others got cheated, and so on and so forth. Some people had even died. It's not right, but it's life. And it's the cost of doing business."

Congress passed the Fair Debt Collection Practices Act in 1978, barring collections agencies from threatening jail time and deceiving consumers.

"We have members that collect on behalf of the government, from federal student loans to meter fines," says Mark Schiffman of the Association of Credit and Collection Professionals, the industry's largest trade association. "We can't put the logo of a government agency on our letterhead. We can't say we're from the Department of Education. We have to say that we're 'ABC,' a company working on behalf of the Department of Education."

Yet Congress created a loophole in 2006, granting what amounts to immunity from deception charges for collection agencies working on behalf of law enforcement.

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.

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I suggest signing up for a prepaid legal service to handle debt collector harassment. Bill collectors hate it when you lawyer up. I pay $9.95 a month and this gets me all the free cease and desist letters that I could ever need. I've used the legal plan several times and the most I've ever paid was $60 on one occasion when I was quoted over $400 by another attorney outside the legal plan for the same service.

 

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