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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.
"We do get people who made a mistake, but a good majority of the students who take our class say that they just procrastinated and didn't intend to pay until they saw the mail from the DA's office," Alvarez says.
Again, internal records dispel any notion of rampant criminality. In 2011, Correction Solutions sent out 33,202 letters on behalf of L.A. County. Fewer than 1 percent of those cases were actually recommended for prosecution.
"They've prosecuted more glue sniffers than bad-check writers in a lot of these counties," consumer-rights attorney Arons says. "This is not an overwhelming problem. The feds keep stats on this, and only one in every 200 checks doesn't clear. And of those, about half clear on redeposit, so we're talking about 0.5 percent of all checks written."
It's hard to fault prosecutors for ridding themselves of a nuisance. Fraud charges require investigations, and most prosecutors have nowhere near the manpower to handle them, admits Scott Burns, executive director of the National District Attorneys Association.
"The real issue is that prosecutors' offices are, almost across the board, underfunded, while suffering hiring freezes and, in some offices, up to 30 percent cuts in personnel," he says. "The only logical thing is to prioritize those cases and those issues that are the most important."
But by ridding themselves of a headache, they're creating a new one for consumers, who are presumed guilty without investigation or chance of appeal.
That's the basic sentiment of Ed Griffith, spokesman for the Miami-Dade Office of the State Attorney. He believes that if a check writer ignores contact by a merchant, that's proof enough of a crime. "Your failure to make good on that check is an issue of intent. The opportunity to make good and not take advantage of that opportunity speaks to your attitude."
Griffith argues that even innocent mistakes merit sentencing to a financial-accountability class. "Even if someone says that their child overdrew their account, we believe putting them in a diversion program is the right move."
Yet some believe the classes are just a ruse to generate fees. "Their financial-responsibility class is nothing more than learning how to balance a checkbook," says Levin, New Jersey's former consumer affairs commissioner. "It's garbage. If people aren't passing a bad check with intent, they shouldn't be going to a class. And if they are, they shouldn't be going to a class; they should be going to jail. Don't tax overburdened consumers with a course that is effectively worthless."
The ACLU's Dansky agrees. "There are far better ways of dealing with the problem. If the cases are truly baseless, then the prosecutors shouldn't be involved, period. Merchants can use debt collectors directly without getting prosecutors involved."
Joseph Ridout has a hard time believing that so many scam artists have chosen careers in bad checks.
"We believe that very few of the recipients of these letters intended to defraud the merchant," says Ridout, who works for Consumer Action, a San Francisco nonprofit. "It's just people who overdrew their checking accounts with a check. The curious thing is that it's a moment in time when banks have destigmatized overdrawing your account with a debit card. What's the difference?"
In fact, it was banker scheming that landed Carole Hirth in trouble last year. More than a dozen major banks have paid multimillion-dollar fines for reordering purchases and delaying deposits solely in order to generate overdraft fees. In Hirth's case, PNC was holding her direct deposits until it withdrew her outgoing charges — effectively overdrafting her account so it could charge extra fees.