Jail Time for a $14 Bounced Check? How Private Debt Collectors Cash in Posing as the Government

By Mosi Secret, ProPublica. Posted March 12, 2009.

Merchants, who are recruited by ACCS to participate, have to complete a checklist before submitting a bounced check, declaring that it was submitted twice to the bank and that notice was sent to the writer by certified mail. "These folks have utterly ignored repeated pleas to make good," Jenkins said. "Therein lies probable cause. ... The notice makes it abundantly clear -- it’s a voluntary program."

Audit: Only a fraction get courtesy notice

But according to interviews and court filings, some participants say they never receive courtesy notices. And plaintiffs’ lawyers say their clients felt intimidated by the threat of steep fines and jail.

"I never heard anything from the bank or from the merchant," Osborn said. "I just got the letter."

Shirley Simeon, an 85-year-old retired psychologist in Chicago, received a repayment notice from ACCS after she bounced a $46 check at Treasure Island Foods, a luxury supermarket. It came under the seal of the Cook County district attorney. Upset, Simeon fired an angry letter back to the grocery chain’s office.

"I have been a customer at the store since 1971," Simeon wrote, "and I am very disappointed to have learned that they would turn such a matter over to an agency of the County."

A 2003 audit of the program in California’s Santa Clara County examined how 120 checks were handled and found that merchants had issued only 39 courtesy notices.

Mom-and-pop merchants fill out a report and send it to ACCS, but because big merchants like Wal-Mart submit bounced checks electronically to ACCS, there’s no written proof of courtesy notices, Jenkins said. "That does not mean the offender did not receive notice from the merchant,"he said.

Michael O’Neill bounced a $14 check at a drug store in Lee County, Fla., and received a repayment demand letter. An automated message showed up on his voice mail: "Twentieth judicial, state’s attorney bad check restitution program," it said. "Our office has an official matter requiring your immediate attention."

When he dialed the toll-free number in the letter, O’Neill had no idea he was dealing with a private company. "I believed I was speaking with a government agency," said O’Neill, who now lives in Detroit. "They try to scare you – seriously, is the attorney general of Florida after me for a $14 bounced check?"

O’Neill attempted to repay the merchant directly but was turned away; retailers who sign up with the program agree not to take payment once a check is referred to ACCS. O’Neill refused to pay the more than $200 in fees requested by ACCS. So did Simeon. "I need to tell you that I have no intention of paying $271.49 for an innocent error of $46.49," she wrote in her letter. "I would love to have a ‘day in court.’ "

Osborn was not so defiant. "I called them," she said. "They said basically I had to pay all these costs or, basically, I would be arrested." Osborn handed the money over and attended the class, but she called it "a waste of time."

In Congress, ACCS lobbying drive triumphs

Now, Osborn is a potential plaintiff in the latest round of class-action litigation against ACCS. Plaintiffs’ lawyers in California, Indiana, Florida and Pennsylvania have filed cases in federal court claiming the company’s practices run counter to state consumer laws and the Fair Debt Collection Practices Act.

The lawsuits accuse ACCS of harassing consumers, misrepresenting themselves as government officials and threatening legal action they don’t intend to take. In California, the court has said as many as 900,000 participants may qualify as plaintiffs. In Indiana, the court approved up to 40,000.

The lawsuits persist despite the program’s earlier reprieve from Congress.

As prosecutors touted the benefits, ACCS picked up more contracts through the ‘90s. Trask promoted the program among DAs in California, and the National District Attorneys Association took note. ACCS made presentations at DA conventions and advertised in The Prosecutor, the national group’s magazine.

By 2001, ACCS had become "the largest private contractor to District Attorneys in the United States," according to company materials. But consumer advocates and plaintiffs’ lawyers had set their sights on the firm.

"This is one of the most reprehensible collection practices we’ve ever seen," said Paul Arons, one of the lead attorneys, who is based in Washington State. "We’re seeking a court order to stop their illegal practices."

n 2003, with legal fees mounting on several fronts, ACCS hired a lobbying firm, Brownstein Hyatt Farber Schreck, to push for a federal barrier against such lawsuits. The company spent more than $660,000 over the next three years, according to lobbying disclosure reports. The Fair Debt Collection Practices Act had not been changed since 1996, despite pressure by bill collectors to loosen its regulations.

See more stories tagged with: barney frank, public citizen, american corrective couns, accs, house financial services , jennifer osborn, fair debt collection prac, district attorneys, deepak gupta, michael schreck, sharon matsumoto, grover trask, don mealing, shirley simeon, michael o’neill, brownstein hyatt farber s, national consumer law cen, margot saunders, mike oxley, levine leichtman capital

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