Times Report: Debt Collectors Harness Prosecutors

by Jeff Sovern

Today's Times has a story headlined "In Prosecutors, Debt Collectors Find a Partner."  An excerpt:

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. 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.

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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.       

Two comments: first while the Fair Debt Collection Practices Act, in § 1692p, provides that under certain circumstances operators of check diversion programs are not automatically debt collectors, the exception applies only if the company "does not exercise independent prosecutorial discretion" and if the prosecutor determines that "probably cause of a bad check violation under State penal law exists, and that contact with the alleged offender for purposes of participation in the program is appropriate. . . ."  If no prosecutor is involved, it seems unlikely that those criteria are satisfied, meaning that the company operating the program can qualify as a debt collector and would be subject to the FDCPA's requirements. Section 1692e of the FDCPA bars the use of false or misleading representations, which includes the "false representation or implication that the consumer committeed any crime" and falsely representing a document as issued by state officials.

Second, the sequence of events makes me wonder what the debt collectors are paying the District Attorneys for.  The DAs don't seem to conduct the class, the fee for which generates the payment for the DA.  Nor are the DAs making the determination of who should take the class.