Bad Check Debt Collection Takes its Turn at the Whipping Post

The New York Times over the weekend ran a front-page Sunday edition smackdown of bad check collectors and their relationships with local district attorneys’ offices.

The lengthy piece, “In Prosecutors, Debt Collectors Find a Partner,” explores the permissive nature of some arrangements between debt collection agencies and DAs that manifest with dunning notices going out on official government letterhead.

District attorneys are generally charged with pursuing bad check writers to protect local businesses. Many outsource certain functions of that charge to private collection agencies.

But the relationships have gotten a bit too cozy according to some consumer groups, and as noted in The Times article:

[The collection letters] 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 piece notes that this type of arrangement exists in more than 300 district attorneys’ offices across the country. Initially set up as a way to help merchants combat fraud, consumer activists claim that “bad check diversion programs” are increasingly becoming revenue centers for local prosecutors in a time of stretched budgets.

Many attorneys who take the collection agencies to court argue that the companies are threatening consumers with jail, even though The Times’ example of letter language to that effect only intimated “the possibility of further action against the accused by the District Attorney’s Office.”

DAs, for their part, like the programs and view them as a way for merchants to get paid and for citizens to avoid prosecution.

“I view it as quite a win-win,” Baltimore County State’s Attorney Scott D. Shellenberger told the paper. “You aren’t criminalizing someone who shouldn’t have a criminal record, and you are getting the merchant his money back.”