A month-long Crosscut investigation into questionable tactics by check collection companies reveals that criminal prosecutors around the Northwest are contracting with private companies, which use prosecutors’ names and letterhead to send threatening letters to thousands of people who’ve bounced checks.
The collection companies demand payment that includes what can amount to hundreds of dollars in discretionary fees for each check and threaten criminal prosecution if recipients don’t pay the fines. They have collected hundreds of thousands of dollars in Oregon and Washington during 2011, only about half of which went to pay back businesses for the bounced checks.
Perhaps you are one of the thousands of people who bounced a check in Washington and Oregon this past year and failed to make good on it. If so, you may have received an ominous letter bearing the letterhead and name of your county criminal prosecutor. It’s a frightening piece of mail, because most likely you’re a law-abiding person who made the dumb but not uncommon mistake of writing a check on an account with insufficient funds while in a tight financial spot.
The letter informs you that the prosecutor’s office received a complaint against you that may result in a criminal charge. You’re told you can avoid prosecution if you immediately send the prosecutor’s office full payment for the check amount, plus as much as $300 in fees, and attend a training course on financial responsibility.
What people receiving these letters don’t know is that the letter didn’t actually come from the prosecutor’s office. It was sent by a private collection company that contracts with the prosecutor, typically paying the prosecutor’s office a fee for each successful collection case.
The letter recipients also don’t realize it’s highly unlikely they will be prosecuted if they don’t pay and don’t take the course -- unless they wrote multiple bad checks and there was strong evidence of deliberate fraud, such as writing a check on a closed account. In Multnomah County, for instance, only 27 bad check cases were prosecuted from 2010-2012.
Now two key lawmakers in Washington and Oregon are questioning the legality and fairness of these privatized check collection programs set up by prosecutors in at least nine Washington counties, including Pierce (Tacoma) and Spokane, and at least four Oregon counties, including Multnomah (Portland).
State Sen. Adam Kline, D-Seattle, chairman of the Senate Judiciary Committee, met Thursday with representatives of the Washington Association of Prosecuting Attorneys to decide whether to seek legislation prohibiting or reforming these programs.
Kline objects to what he sees as the deceptive nature of the letters and that prosecutors do not look for evidence of criminal intent before alleged bad check writers are threatened with prosecution. “These companies are sending out a letter with the prosecutor’s name and signature that purports to be that of the actual prosecutor, and the prosecutors are letting them do it,” he fumes. “Both state and federal law say collection agencies can’t pretend to be someone else.”
In Oregon, Senate Judiciary Committee chairman Floyd Prozanski, D-Eugene, a prosecutor who first learned about these check enforcement programs when contacted by this reporter, has asked his staff to draft reform legislation while he gathers more information from prosecutors. “I have a concern about a private entity that’s collecting debts being allowed to use a government seal to represent itself as something it isn’t,” he says.
But other prosecutors say these check enforcement programs are needed because merchants — ranging from giants like Costco and Target to mom-and-pop businesses — receive lots of bad checks and law enforcement agencies lack the resources to investigate and prosecute these cases and ensure the merchants get paid. Nationally in 2009, Americans wrote $127 billion worth of checks that were returned, according to Federal Reserve data.
“In a time of dwindling resources, when police and prosecutors have had a lot of budget cuts, this program affords the opportunity for people to get restitution and justice they wouldn’t be able to pursue otherwise,” says Jack Driscoll, Spokane County’s chief criminal deputy prosecuting attorney. His office started a privatized check enforcement program ten years ago.
Prosecutors in Washington and Oregon say businesses appreciate these programs. “Costco loved the program so much they tried to buy us a whole bunch of pizzas, but we had to say no, thank you,” says Joseph Wheeler, a senior deputy prosecuting attorney in Thurston County, Wa.
The King County prosecutor’s office also says it lacks the resources to pursue bad check cases, which are misdemeanors in Washington if the check amount is under $750. But both Prosecuting Attorney Dan Satterberg and his predecessor Norm Maleng declined to set up a privatized check collection program despite being solicited by collection companies. “We don’t mix public prosecution authority with private interests,” says Ian Goodhew, Satterberg’s deputy chief of staff.
In Washington, participating prosecutors contract with Missouri-based BounceBack Inc. In Oregon, they contract with either BounceBack or California-based CorrectiveSolutions, which is in the process of settling a class-action lawsuit in California alleging violations of federal and state consumer protection laws. Neither company responded to repeated phone calls and e-mails for comment for this article.
Washington Attorney General Rob McKenna’s office did not respond to requests for comment, and Attorney General-Elect Bob Ferguson declined to comment. Neither Gov. Chris Gregoire’s office nor Gov.-Elect Jay Inslee responded to requests for comment.
Violations of federal and state law?
Critics say these check enforcement programs violate federal and state consumer protection laws. The federal Fair Debt Collection Practices Act bars debt collectors from using deception in collecting debts and assessing extra fees that are not allowed by law. Washington and Oregon have similar state consumer protection laws.
Both states require collection agencies to register. But neither BounceBack nor CorrectiveSolutions are registered in Washington or Oregon. BounceBack has claimed it’s not required to register because it’s simply administering a check enforcement program on behalf of prosecutors. Sen. Kline says that’s nonsense.
In a federal class action suit filed in Spokane in 2010, the plaintiff alleged that BounceBack violated federal and state law by leading alleged bad check writers to believe the county prosecutor was going to charge them with a crime. The judge dismissed the case last year, though he found that BounceBack was subject to both federal and Washington state laws governing collection agencies.
A 2006 amendment to the federal law established an exemption from rules governing collection agencies for privatized check enforcement programs. But it requires the prosecutor to determine that probable cause exists under state law to charge the person with a crime before the private contractor sends the threatening letter. Paul Arons, an attorney in Friday Harbor, Wa. who has filed class action suits against CorrectiveSolutions and other check collection companies, says prosecutors do not determine criminal intent before approving cases for the program.
The question of what’s required to find criminal intent is a bit murky. The bad check law in Washington requires check writers to know they had insufficient funds in their account – which some do not -- to be guilty of a crime. Oregon law similarly requires check writers to know the check will bounce, but it adds that criminal intent is shown by the person’s failure to make good on the check within 10 days after receiving notice of the bad check.
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