In Prosecutors, Debt Collectors Find a Partner
Noah Berger for The New York Times
Angela Yartz with debt
collection notices on district attorney letterhead. She was threatened
with conviction over a $47.95 check to Walmart.
By JESSICA SILVER-GREENBERG
Published: September 15, 2012
The letters are sent by the thousands to people across the country who
have written bad checks, threatening them with jail if they do not pay
up.
Multimedia
They bear the seal and signature of the local district attorney’s
office. But there is a catch: the letters are from debt-collection
companies, which the prosecutors allow to use their letterhead. In
return, the companies try to collect not only the unpaid check, but also
high fees from debtors for a class on budgeting and financial
responsibility, some of which goes back to the district attorneys’
offices.
The practice, which has spread to more than 300 district attorneys’
offices in recent years, shocked Angela Yartz when she was threatened
with conviction over a $47.95 check to Walmart. A single mother in San
Mateo, Calif., Ms. Yartz said she learned the check had bounced only
when she opened a letter in February, signed by the Alameda County
district attorney, informing her that unless she paid $280.05 —
including $180 for a “financial accountability” class — she could be
jailed for up to one year.
“I was so worried driving my kid to and from school that if I failed to
signal, they would cart me off to jail,” Ms. Yartz said.
Debt collectors have come under fire for illegally menacing people
behind on their bills with threats of jail. What makes this approach
unusual is that the ultimatum comes with the imprimatur of law
enforcement itself — though it is made before any prosecutor has
determined a crime has been committed.
Prosecutors say that the partnerships allow them to focus on more
serious crimes, and that the letters are sent only to check writers who
ignore merchants’ demands for payment. The district attorneys receive a
payment from the firms or a small part of the fees collected.
“The companies are returning thousands of dollars to merchants that is
not coming at taxpayer expense,” said Ken Ryken, deputy district
attorney with Alameda County.
Consumer lawyers have challenged the debt collectors in courts across
the United States, claiming that they lack the authority to threaten
prosecution or to ask for fees for classes when no district attorney has
reviewed the facts of the cases. The district attorneys are essentially
renting out their stationery, the lawyers say, allowing the companies
to give the impression that failure to respond could lead to charges,
when it rarely does.
“This is guilty until proven innocent,” said Paul Arons, a consumer
lawyer in Friday Harbor, Wash., about two hours north of Seattle.
The partnerships have proliferated from Los Angeles to Baltimore to
Detroit, according to the National District Attorneys Association, as
the stagnant economy leaves city and state officials grappling with
budget shortfalls. Lawyers for the check writers estimate that more than
1 million of them are targeted a year. The two main debt collectors —
California-based CorrectiveSolutions and BounceBack of Missouri — return
millions of dollars each year to retailers including Safeway, Target
and Walmart.
While the number of bounced checks has fallen as more shoppers pay with
credit or debit cards, Americans still write billions of dollars worth
of bad checks each year. In 2009, $127 billion worth of checks were
returned, according to the most recent data from the Federal Reserve.
That’s down from $182 billion in 2006.
Because the cases are not fully investigated, there is no way of knowing
whether the bad checks were the result of innocent mistakes or
intentional fraud. The so-called bad check diversion programs start from
the position that a crime has been committed.
Before the first partnerships were rolled out in the late 1980s,
merchants who received a bad check typically tried to retrieve the money
themselves or through a private collection company, with abysmal
results. Those merchants who suspected fraud could send along the checks
to their local district attorneys.
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