Lois Artz of Petaluma, Calif., is a 70-year-old retired bank employee who wrote a bad check. Artz said she intended to deposit another check to cover the $28 check that bounced, but she forgot.
Simona Pickett, a 35-year-old federal government worker who lives in Middle River, Md., also bounced a check. Pickett wrote a $21.66 check to a local supermarket. That check was returned for insufficient funds.
No question these two women were wrong. You should never write a check when you do not have the funds in your checking account.
Certainly Artz should have known better.
For their errors, both consumers were referred to a check restitution program operated by prosecutors in their local areas. They were sent letters telling them they owed fees totaling several times the amount of the bounced check. They were informed they would have to take a class intended to teach them financial responsibility.
And they were told that if they didn’t pay up and go to class, they would be prosecuted.
A number of state and local prosecutors across the country are using “check diversion” companies to operate their restitution programs in an effort to reduce the number of bounced checks. Check-diversion companies are private, for-profit debt collectors that contract with prosecutors to collect returned checks. Prosecutors using check-diversion companies argue that the programs work by returning millions to merchants and decreasing court cases.
It is certainly not unreasonable for people who write bad checks to pay for their financial mismanagement.
But Public Citizen and the National Consumer Law Center are complaining to the media and to Congress that some check-diversion companies – most notably, California-based American Corrective Counseling Services Inc. – are engaging in abusive and deceptive collection practices. They claim consumers such as Artz and Pickett are not given a fair chance to make good on their bounced checks before they get nasty letters and are assessed high fees.
Artz, the former bank employee, said she forgot to deposit the check because she’s dealing with a daughter who has a terminal illness.
“I was treated like a criminal,” she said during a teleconference organized by the consumer groups. “I was terrified of going to jail.”
Pickett was changing banks and because of a mix-up, her new account didn’t have the overdraft protection she wanted.
“By no means am I saying I shouldn’t pay what I owe, but they shouldn’t be allowed to terrify me either,” Pickett said.
Congress is considering legislation to exempt check-diversion companies from the Fair Debt Collection Practices Act which prohibits deceptive and abusive collection methods.
The proposed legislation, which is being pushed by the California company and the National District Attorneys Association, would amend the act to essentially allow check-diversion companies to be excluded from the definition of a debt collector.
Paul Logli, the president of the National District Attorneys Association, said the exemption is needed to protect prosecutors and the companies they hired from consumer lawsuits.
That’s an interesting position considering that consumers have filed civil lawsuits around the country against check-diversion companies.
Deepak Gupta, a staff attorney for Public Citizen’s Litigation Group, said there are at least six pending class-action lawsuits covering consumers in 13 states. American Corrective Counseling Services denies any wrongdoing.
You might wonder what the current law says about debt collection.
Well, it says you can’t harass people. You can’t lie. You can’t be abusive. You can’t overcharge people. And if there isn’t a real possibility of prosecution, you can’t threaten someone with jail.
Every consumer ought to be paying attention to this legislation. The House has approved it and it’s now being considered by the Senate. And it will erode our consumer rights – not our right to bounce checks, but our rights to be treated fairly when we make a mistake.
It’s preposterous to amend the Fair Debt Collection Practices Act to allow check-diversion companies to go unchecked for abusive and unfair practices.
Contact Michelle Singletary at The Washington Post, 1150 15th St. N.W., Washington, D.C., 20071 or singletarym@washpost.com.
