Getting a letter on your city or county prosecutor’s letterhead, noting that you owe money and threatening you with jail time, is a scary prospect. Unfortunately, some 500 municipalities are allowing debt collectors to use such letterhead to get people to make good on bounced checks — and enrich their bottom lines a little while they’re at it.
The New York Times recently examined a practice in which District Attorneys partner with debt collection firms to go after people who bounce checks. In theory, the D.A. provides the oversight and the use of its letterhead or logo, and the debt-collection firm is supposed to do the grunt work of actually tracking down the debtors and getting them to pay.
In reality, consumer advocates say, the practice amounts to a little more than a shakedown tactic. Debt collectors threaten jail time even though the person hasn’t been charged with a crime, and they tack fees of up to $200 on top of the debt amount, often for “financial education classes” that may or may not be helpful to borrowers, since the law doesn’t stipulate any minimum requirements. These fees are divided between the prosecuting jurisdiction and the debt collector.
“People are terrified. That’s why it works,” says attorney Paul Arons. And the fact that cash-strapped cities and counties are earning a few extra bucks without having to do any work makes it hard to fight the practice in court.
“What I tell people is if you thought your check was going to clear when you wrote it, you didnt commit a crime. You shouldn’t be treated like a criminal,” Arons says.
The reason debt collectors partner with D.A.s over bad checks and not other kinds of debt is because it is a crime to knowingly pass a bad check, says Margot Saunders, attorney at the National Consumer Law Center.
The “knowingly” part of that stipulation is a reason why some consumer advocates and legal experts think this practice should be abolished. Most people who bounce checks and who get these letters aren’t hardened criminals, they say; they’re just financially irresponsible or slipped up, so sending letters that assume a criminal intent in the name of collecting both a debt and big penalty fees takes advantage of the law that permits this.
A clause in the Fair Debt Collection Practices Act — which prohibits other debt collectors from threatening you with jail — gives more leeway to the collectors that work in tandem with local prosecutors.
“The underlying assumption is that the prosecutors would be exercising oversight to keep them on the straight and narrow,” says Tom Pahl, an assistant director at the Federal Trade Commission. Pahl says that reports such as the one in the Times were “raising concerns about whether prosecutors are performing the role Congress thought they were going to.”
For now, though, the practice is legal; Congress would need to change the law to put a stop to it.
In this economy, it should be no surprise that debt collectors are getting creative, says Ira Rheingold, executive director of the National Association of Consumer Advocates. “What you’ve got here is a real battle from the debt collection industry to get blood from rocks.”
This isn’t the only debt collection method that uses the threat of imprisonment to get people to pay up. In some cases, creditors go to court and get an arrest warrant or what’s called a “body attachment” for people who miss a court date — sometimes a date they missed because they were deliberately never informed by the collection agency. Often, the amount of the bail they’re told they must pay is the exact amount of the debt plus penalties being sought.
Other debt collectors, working in tandem with hospitals, have posed as medical personnel and strongly hinted that people couldn’t receive care unless they paid past-due medical bills. A complaint brought by the Minnesota Attorney General even cites a case of a new mother who was told she couldn’t take her baby home until she paid $800.
If you get a letter from a debt collector acting on behalf of a prosecutor, “If you don’t like the way that the collector is treating you, my suggestion would be to try and contract the D.A.’s office,” says Pahl. “Ultimately, they’re supposed to check on the actions of these collectors.”
Even if you owe a debt, don’t forget that you do have rights. Under the FDCPA, debt collectors aren’t allowed to call you before 8:00 a.m. or after 9:00 p.m. Collection agents aren’t allowed to call you “repeatedly,” curse at you or threaten you. Third-party debt collection companies that aren’t working on behalf of a prosecutor aren’t allowed to tell you that you’ll be arrested if you don’t pay a debt, and according to the FTC they’re not allowed to falsely claim that you’ve committed a crime.