Constitutional Law Criminal Law Litigation

DA Helping Debt Collectors In Latest Round of Government Extortion Letters

This May, I wrote about the Federal Government issuing demand letters to all LIRR employees on disability advising them that the letter presented their final opportunity to come forward if they were faking their disability or else face prosecution. I worried that honest folks on disability might accept their proposal to forego all future benefits in return for a free pass on a prosecution.

Today’s Sunday NY Times tells of another example of government getting into the extortion letter business. This time its even worse because this time its District Attorney’s Office acting on behalf of private debt collectors as opposed to a governmental entity trying to fight disability fraud with perhaps too broad a brush. The new letters are sent to folks who have paid bills with checks that have bounced. They bear the seal and signature of the local district attorney’s office but the letters are actually from debt-collection companies which the prosecutors allow to use their letterhead! In return, the companies try to collect not only the unpaid check amount and bank fees, but also additional high fees from debtors to pay for a class on budgeting and financial responsibility, some of which goes back to the district attorneys’ offices.

This unholy partnership has spread to over 300 DA’s offices according to the Times, in cities from La and San Mateo in California to Detroit to Baltimore. The letters threaten jail time if the merchant is not promptly reimbursed and if the “financial accountability class” is not taken. While debt collectors have gotten into trouble in the past for unwarranted threats of jail, now with the threat being placed on DA letterhead, consumers are naturally worried that they could really go to jail for a $47 bounced check. The Times reported on just such a case involving single mom Angela Yartz who bounced a $47.95 check to Walmart and received a letter from the Alameda County District Attorney’s Office demanding she repay the $47.95 and take the $180.00 financial accountability class along with other fees totaling a whopping $280.05; it threatened a year in jail if she failed to comply. She said she got the letter before even receiving the notice from her bank that the check had bounced.

What’s Next? Debtor’s Prison?

And that’s the problem with this whole practice. Bouncing a check is only a crime if you write the check knowing that there was not enough money in the account. You have to intend to defraud the merchant by giving them a check written to either a closed account or one with insufficient funds. Making a good faith mistake or forgetting to transfer the right amount into the account or not realizing that a check you deposited has not fully cleared (or has bounced itself) is not a crime. Yes, its bad financial practice, I agree, but its not a crime.

According to the NY Times the DA’s offices responded in typical fashion:

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. “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.

But if the DA’s offices have chosen not to allocate resources to this crime then renting out their letterhead is not the solution. They could have lobbied for added fees onto these cases that would cover the cost of them trying to focus on people actually defrauding merchants. And if they are not actually arresting people who don’t respond to these letters, then the whole thing is a fraud. The worrisome part is that the debt collectors never contact the DA’s office before sending out a letter and they don’t even make a determination of fraud. It’s what makes these letters extortive – false threats of jail time when the prosecution could never prove an intent to defraud as required by the law the letter is based on. Furthermore, the letter coming on the DA’s office letterhead gives the recipient the false not in that the case has been reviewed and accepted for prosecution by the office when in fact the office has NO IDEA the letter has even gone out.

Look, Americans bounced $127 Billion in checks last year (though that’s actually down from 2006 when they bounced over $180 Billion worth of checks). No one is saying that merchants don’t have a right to pursue reimbursement for that amount. Similarly, if there is proof that the check was written fraudulently then the person should be prosecuted. But here, that’s not the case. Instead of just a cost of doing business and figuring out a way to curtail bounced checks, the merchants have bought themselves DA letterhead and are threatening jail time when there is NO PROOF that a crime has been committed. Making folks pay for an expensive class on top of that is even worse. If these people are allegedly crooks and frauds what good would a financial accountability class do for them anyway? They supposedly knew what they were doing remember?

Consumer advocates and class action lawyers have filed various suits arguing that these programs are unconstitutional. Let’s hope they are successful because otherwise this nasty alliance could easily be expanded to other alleged financial crimes resulting in more people being accused of crimes that they didn’t commit and which the DA could never prove. The next step after this would be the re-institution of Debtor’s Prison.

Leave a Reply

Your email address will not be published.