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<div class="timestamp">September 15, 2012</div>
<h1>In Prosecutors, Debt Collectors Find a Partner</h1>
<h6 class="byline">By
<span>
<a href="http://topics.nytimes.com/top/reference/timestopics/people/s/jessica_silvergreenberg/index.html" rel="author" title="More Articles by JESSICA SILVER-GREENBERG"><span>JESSICA SILVER-GREENBERG</span></a></span></h6>
<div id="articleBody">
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
“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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
“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. </p>
<p>
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. </p>
<p>
“This is guilty until proven innocent,” said Paul Arons, a consumer
lawyer in Friday Harbor, Wash., about two hours north of Seattle.
</p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
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. </p>
<p>
The influx of bad-check reports overwhelmed district attorneys’ offices,
according to Grover C. Trask, a former district attorney in Riverside,
Calif., considered the father of such programs. “It was a way to deal
with a fairly serious nonviolent crime going on in the business
community, but not overburden the court system or the resources of the
district attorneys,” Mr. Trask said. </p>
<p>
The programs were quickly challenged by consumer lawyers, who took aim
primarily at California-based American Corrective Counseling Services.
Facing a barrage of class-action lawsuits, the company reorganized
through a Chapter 11 bankruptcy in 2009. </p>
<p>
Still, its successor, CorrectiveSolutions, which says it has contracts
with more than 140 prosecutors, has been dogged by similar legal
challenges, including a class-action lawsuit pending in federal court in
San Francisco that claims the company “has constructed an elaborate
artifice” to terrify borrowers into paying. CorrectiveSolutions, which
did not respond to requests for comment, has contested the claims, court
filings show. </p>
<p>
For the collection companies, the partnerships offer a distinct
financial benefit: the “financial accountability” classes. Typically, a
small portion of the class fees, which can exceed $150, are passed on to
the district attorneys’ offices. Check writers are led to believe that
unless they take the courses, they could end up in jail. </p>
<p>
A letter signed by the Santa Clara County district attorney, for
example, informed Kathy Pepper that the “bad check restitution program”
would allow her to avoid “the possibility of further action against the
accused by the District Attorney’s Office.” </p>
<p>
Petrified, Ms. Pepper agreed to pay $170 for a class and another $25 to
reschedule the class last year after accidentally writing a $68 check in
the midst of a divorce last year that upended her finances. </p>
<p>
What Ms. Pepper did not know was that her bad check was sent directly
from the merchant to the debt-collection company, without any prosecutor
determining whether she had actually committed a crime. </p>
<p>
Under the terms of five contracts between CorrectiveSolutions and
district attorneys reviewed by The New York Times, merchants refer
checks directly to the company, circumventing the prosecutors’ offices.
While the merchants are required, for example, to attempt to contact the
check writer, they can send any bad checks to the collection companies
if the shopper hasn’t responded, typically within 10 days. </p>
<p>
“No one at the district attorney’s office reviews the cases” before the
collection company sends out letters, said Priscilla Cruz, an assistant
director in the Los Angeles district attorney’s office. </p>
<p>
As of July, CorrectiveSolutions had sent out 16,955 letters on behalf of
the Los Angeles district attorney, and during that time 635 people
attended the program’s classes, county data show. While few people will
be prosecuted for not attending the class, there is a possibility of
charges, Ms. Cruz said. </p>
<p>
While the percentage of targeted check writers taking the classes is low
— 4 percent to 7 percent in recent years — the percentage of cases
referred for potential prosecution is much lower, about 0.10 percent.
</p>
<p>
Few bad-check writers are prosecuted, especially for relatively small
sums, lawyers say, because it is hard to prove the person meant to
defraud the merchant. </p>
<p>
Gale Krieg, a vice president at BounceBack, said he has turned down
business from prosecutors who won’t agree to at least have all copies of
the checks sent to their offices, where prosecutors can determine if a
crime has been committed. Mr. Krieg, who said the company has contracts
in 38 states, acknowledges the limitations: “Whether they exert
oversight isn’t something that we can control.” </p>
<p>
Prosecutors point out that people who write bad checks should be held accountable for paying back what they owe. </p>
<p>
“I view it as quite a win-win,” said Baltimore County State’s Attorney
Scott D. Shellenberger. “You aren’t criminalizing someone who shouldn’t
have a criminal record, and you are getting the merchant his money
back.” <a title="Web site" href="http://correctivesolutions.org/">On its Web site</a>, CorrectiveSolutions says that its classes result in low rates of recidivism. </p>
<p>
Some officials in district attorneys’ offices have quietly raised
concerns that the programs are misleading. A November 2009 county audit
of Deschutes County, Ore., titled “District Attorney’s Office-Cash
handling over revenues,” wondered whether elements of the program could
be “disingenuous.” The prosecutor’s office, which did not return
requests for comment, contracts with CorrectiveSolutions to handle its
bad checks. Ms. Yartz said she accidentally wrote a check for groceries
on her credit union account, rather than her bank checkbook. She had
recently moved and was in the process of closing that account. </p>
<p>
Even after Ms. Yartz paid $100.05 in February to cover the bounced
check, the returned item fee and an administration fee, she got a letter
signed by the Alameda district attorney informing her that her
remaining balance was $180 for the class. After consulting with a
lawyer, she decided to take her chances rather than pay for a class she
could not afford, to avoid being punished for a crime she said she did
not commit. Ms. Yartz also questioned the need for a class on budgeting
and financial accountability: “If I meant to bounce this check like a
criminal, why do I need a class on budgeting?” </p>
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