Paul Arons, the lawyer who has brought class action lawsuits against Corrective Solutions, called what the district attorneys were doing “unethical.”
“Their letters come on letterhead from the district attorneys. That’s a lie,” Arons said. “They’re not from the district attorneys. . . . What the DAs are doing is renting out their stationery.”
Traub disagreed. “It is not our stationery and importantly the letters clearly state [the program] is being operated by a third party,” he said. Corrective Solutions disclosed this at the bottom of the letter’s first page; BounceBack made no mention that a third party is involved. Either way, critics argue that a fine-print disclosure buried in the letters cannot overcome the impression created by having the district attorney’s name, address, and official seal at the top.
Arons said it is also disingenuous to threaten check-writers with prosecution. “It is rare that anyone ever gets prosecuted for a bad check,” he said. “You don’t even have to attend the classes as long as you make good on the check.”
Most of the district attorneys involved in these programs do not, as a matter of policy,prosecute cases for checks of around $200 or less. (The average bounced check is for about $70.) But even when the checks are for more than that, the DAs rarely prosecute.
In Middlesex County, for example, not a single case referred from the bad-check program with Corrective Solutions has been prosecuted since its inception in 2005. The same is true for the Norfolk bad-check program, which started last year. Of the 104 cases that have been forwarded by Corrective Solutions to the Cape and Islands DA for prosecution since the bad-check program was instituted in 2005, 75 percent have not been prosecuted.
The other district attorneys did not provide prosecution data.
Scott Harshbarger, a former Massachusetts attorney general and Middlesex district attorney, defended the programs. “You’re a new DA and you come in and somebody says, ‘Look, small businesses are going to be happy with you. You’re going to divert a lot of cases out of the system.’ It’s a ‘no harm done’ program,” he said.
Attorney General Martha Coakley, another former Middlesex district attorney, actually initiated that county’s bad-check program with Corrective Solutions in 2005. Coakley, through her spokesman, declined requests for an interview.
The retailers that benefit from the program had nothing but praise. “Like all supermarkets, we operate on a very small margin,” said Big E’s co-owner Michael Superson. “So we’re very grateful to have the program available to us.” Some of the large retailers that participate in the program are Walmart, Best Buy, Lowe’s, and Staples.
The biggest beneficiaries, however, are the debt-collection companies. Besides the class fee, which ranged from $120 to $235 depending on the county, a wide array of numerous other fees may be imposed on the alleged bad-check writers, including convenience fees, late fees, and rescheduling fees.
Some of the district attorneys emphasize that participation in the program is voluntary. Technically, the recipients are being invited to participate in a program if they want to avoid the listed penalties; they are not officially being mandated to participate. But advocates say its voluntariness is illusory.
Dworsky, the former Massachusetts assistant attorney general in consumer protection, said, “How can you call a program voluntary when people get notices that say things like, ‘Warning — third notice of failure to comply?’ That doesn’t sounds terribly voluntary to me.”
Another focus of critics is the type of envelopes the companies use that show the words, “Bad Check Restitution Program” or “Check Enforcement Program,” through the return-address window.
“One of the cardinal rules of debt-collection law, both state and federal, is the prohibition against telling third parties about a debt, including an explicit ban on using envelopes which disclose that it is a communication relating to a debt,” said Dworsky.
In Massachusetts, the Division of Banks licenses and regulates debt-collection companies, while regulations issued by the attorney general cover entities such as retailers collecting money owed to them.
Neither Corrective Solutions nor BounceBack is licensed by the Division of Banks.
As of last October, the Division of Banks was unaware of the district attorneys’ bad-check programs, and declined to say whether its regulations cover these companies.
By last week, nothing had changed. “It’s a new industry in terms of my familiarity with it,” said banking commissioner David Cotney. “So I can’t give you an opinion as to whether or not these companies should be licensed.”Continued...