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How Debt Collectors Get Away With Terrorizing Consumers -- With the Blessing of Public Officials

Thanks to a congressional loophole, local prosecutors actually hire private firms to harass citizens

By that point, she was so deep in debt that she filed for bankruptcy. Only after she consulted an attorney did she discover that it wasn't the DA sending her all those letters. It was an Arkansas company called District Attorney Technical Services. "The real district attorney had not investigated me or considered filing charges against me."

Meanwhile, the letters kept coming, threatening her with arrest. She eventually became part of a class-action lawsuit filed by consumer-rights lawyer Paul Arons against the company's owner, Henry Craighead.

The suit claimed that District Attorney Technical Services illegally disguised itself as a government entity in order to extort penalties and fees. In 2011, a federal court awarded 36,000 victims nearly $750,000 in damages.

But it was too late. That same year, Craighead declared bankruptcy himself and paid only $160,000 of the court-ordered damages. He's now retired and living comfortably in Oregon, Arons says.

"That's what they do," Arons says. "Whenever we win one of these cases, they declare bankruptcy in order to avoid paying out damages. It's absolutely maddening."

The same thing had happened a year earlier, when Arons won a similar suit against American Corrective Counseling Services. A federal court ruled that, despite the company's claims of immunity, it had misrepresented itself, made false threats of prosecution and charged exorbitant penalties.

Again, Arons' clients were unable to collect on their victory. American Corrective declared bankruptcy, saying it couldn't repay investors — despite having herded $47 million in fees over the previous four years.

A few months later it was back in business, reformed as Corrective Solutions and "free and clear" of all liability, according to court records.

Today it's the biggest bad-check collector of them all.

Mike Wilhelms is president and CEO of Corrective Solutions. His LinkedIn profile boasts a photo of a fresh-faced surfer boy, one who happens to be in charge of more than 200 employees. The counties of Los Angeles, San Bernardino, Riverside and Orange are his biggest customers, all within driving distance of his palm tree–lined headquarters in San Clemente, where it's clear that business is booming.

Consumer-rights lawyers estimate the company sends out 2 million letters annually. (The company did not respond to repeated interview requests.)

The Corrective Solutions website does its best to imply that it's an arm of law enforcement. A slide show gently fades in and out with statements about "holding offenders accountable for their actions." An interactive map shows its 140 contracts with DAs.

Nowhere does it say that most of these "offenders" have never been investigated or formally charged with a crime.

The site boasts dozens of quotes from pleased prosecutors, who speak glowingly of reduced caseloads and crime rates. Yet Contra Costa District Attorney Robert Kochly offers the most telling endorsement, noting he's grateful for "more revenue to my office."

District attorneys don't pay a cent for Corrective Solutions' services. Instead, the company pays them to run their bad-check programs. All a prosecutor must do is hand over official letterhead, along with a list of bad-check writers and a bit of "case criteria."

Between 2005 and 2008, Los Angeles County raked in more than $1 million. Miami-Dade made more than $375,000.

When asked whether Miami-Dade's program was little more than a moneymaking scheme, Toussaint balks.

"Diverting such cases out of the criminal justice system gives an individual with no prior record an opportunity to avoid having a criminal record," she says. "It makes the victim receiver of the worthless check whole, and it is done with no cost to the taxpaying citizens of our community. Pre-trial diversion programs also allow the courts to focus on other types of criminal activity."

While prosecutors claim they use collection agencies to decrease caseloads, some companies actually promise to expand them — for the sole purpose of generating more money.

Take BounceBack, the industry's second-largest player. It owns Check Connection, and makes no bones that generating fees is its main mission.

"Is your program suffering from diminishing checks?" asks the company's website. "Visit Check Connection to learn how you can substantially increase the number of checks in your bad-check program."

The site offers examples from places like Palm Beach County in Florida, which switched to BounceBack in 2006 after "merchants and other victims were complaining that they felt intimidated by the people administering the program. Check writers complained of strong-arm collection tactics."

Since then, Palm Beach has "passed the $1.5 million mark."

BounceBack won't discuss its business practices: "The press usually doesn't take anything that we say seriously, so we've begun to decline to make comments," says company vice president Gale Krieg.

Still, prosecutors eagerly rise to the industry's defense.

"They're not just some debt-collection company," Louis Alvarez, head of the Los Angeles DA's check program, says of Corrective Solutions. "What they are doing is trying to help us recoup money for victims."

The real victims, at least in Alvarez's mind, aren't math-challenged consumers but the merchants who, according to the Federal Reserve, lose more than $120 billion annually to bad checks. He argues that Corrective Solutions is simply helping his overburdened and underfunded office get restitution — while "rehabilitating" check writers who are likely guilty of fraud.

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7 comments
shootist.mp
shootist.mp

Have a crushing load of debt? 

Don't want to declare bankruptcy? 

Move to Florida and get a drivers license. Florida law forbids judges from issuing judgement for debt acquired in another state (no, I'm not an atty and wouldn't want to be one).

tncdel
tncdel

I'm a non-partisan Independent. While I deem it commendable that we rein in over-zealous debt-collectors who resort to unethical tactics to collect debts, I think we should also be mindful of how all-too-often the same can be said for debt-collection in the form of government taxation.

The Obama admin, for example, has been terrorizing Catholics and Protestants whose beliefs are opposed to government funding of abortions. I myself am not into mysticism, so all religion is utter nonsense to me. Yet I deem human life sacred, and I believe no one has the right to "play God" with the life of another. And though a woman can legally kill her kid before birth, at least don't use my tax dollars to make such a morally wrong "choice."

When you come right down to it, ALL murderers are "pro-choice." A man who sticks you up with a gun and shoots you dead made a "choice" to kill you.

laxx1559
laxx1559

@tncdel This may sound callous but, non-aborted babies would cost the taxpayers hundreds millions of dollars. It is a woman's choice, because it is her body.  There are more important things to be worrying about than theoretical humans, because they aren't considered a "life" until after a certain point- after which an abortion is illegal.  

tncdel
tncdel

@laxx1559 @tncdel, You said, "It is a woman's choice, because it is her body."

If you had taken at least a high school level course in biology, you wouldn't have said something embarrassing yourself like that. Sorry to burst your PC bubble, but it's the body of the unborn baby, not the mother's body, that gets killed.

TruthTeller
TruthTeller

Corrective Solutions paid handsomely for that loophole. Between 2003 and 2006, the company spent more than $660,000 on lobbying. It also slathered donations on key senators like Connecticut Democrat Christopher Dodd, who would later leave office after accepting a sweetheart deal from a mortgage company.

And the Sheeple still feel that the Democrats look out for the people.

abramsrl
abramsrl like.author.displayName 1 Like

This type scam on consumers comes to you via Eric Garcetti, Daryl Steinberg, Denis Zine, Jan Perry, Wendy Greuel, and a host of other goniffs and mamzers like billionaires Eli Broad and former Mayor Riordan.  Here's how the scam works --

The corrupt politicos give billions of tax dollars to corrupt developers.  The main vehicle to steal the tax dollars were the Community Redevelopment Agencies which Gov Brown with the help of the Calif Supreme Court abolished effective 2-1-2012.  The death of the CRA's is a major reason that State does not have a deficit this year.  The Governor's tax increase was also necessary since Garcetti and Friends had squandered billions of tax dollars and the public had no choice except to pay twice to replenish the stolen tax funds.

The cities, counties and State have been running other scams to loot the citizenry of their money in order to make up for the billions given to the corrupt developers.  One scam is to give out bogus tickets or make unsubstantiated criminal charges against the poor.  Then the poor are allowed to buy their way out of jail by paying the cities, counties, and state hundreds and sometimes thousands of dollars.  The government would not be running these criminal scams if they would stop giving away tax dollars to billionaires.  Look at all the money to AEG, to corrupt Hollywood developers, to CIM Midtown, tax rebates to hotels, promises to refurbish downtown hotels.

If you have a medical marijuana card but the cops nonetheless bust you, you can hear the assertion that your doctor did not write out your diagnosis and your prescription is invalid.  I've heard this nonsense directly from a judge (no not me, I don't use MJ).  Then the victim-defendant has a choice stay in jail until his trial or enter into supervised probation -- which can cost thousands of dollars per year.  

The city has the scam whereby you get a ticket for parking at a broken meter.  That means a broken meter is likely to bring in $1,000.00 per day in fines, but a functioning meter won't bring in more than $20/day   -- which is why there are more and more broken meters even though the new meters are supposed not to break. 

If you want to be further victimized by the government running criminal scams, just vote for Garcetti, or Perry, or Trutanich, or Greuel, Feuer, or Zine, or anyone else who has been in government during the last ten years.  They are the ones who gave away tens of billions of tax dollars and have been cheating you in order to raise funds to keep the system afloat. 


 
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