According to the New York Times, debt collectors in certain jurisdictions
have been using the letterhead of the local prosecutor's office in
order to collect debts. Although the article does not fully explain exactly
how the letters threaten consumers with jail time, a look at the Illinois
statute regarding bounced checks helps fill in some of the blanks.
In Illinois, and in other states, knowingly writing bad checks is a crime.
The key word here is "knowingly." Accidentally bouncing a check
is one thing. Writing a check that you know will bounce is another. Given
that it's difficult to prove intent, you can make the argument that
"writing bad checks will get you put in jail." The statement
is not 100% false, but it is also not 100% true.
Also, prosecutors and the police have much more pressing matters to attend
to than a bounced check for $40. However, debt collectors are in the business
of collecting debts, no matter how small. According to the NYT, 300 jurisdictions
in the U.S. allow debt collectors to use prosecutor letterhead to collect
on bad checks.
But why? According to the article, some prosecutors find that the practice
returns significant amounts of money to retailers and other businesses
without wasting state resources. Additionally, in some jurisdictions,
the prosecutor's office takes a cut of the funds recovered and receives
a hefty registration fee for "required" financial management courses.
While efficiency in government is always a good thing, this tactic is despicable.
Prosecutors are undermining the authority of their positions by allowing
debt collectors to threaten criminal prosecution before a law enforcement
official has even made a determination whether a crime has occurred. Instead,
these programs assume that a crime has occurred and rely on the idea that
most people will pay up to avoid prosecution.
Does this conduct violate the law? I would argue that it does. The Fair
Debt Collection Practices Act prohibits debt collectors from threatening
to take legal action that cannot actually be taken. The classic example
is a debt collector stating, "If you don't make a payment right
now, there are cops outside your home who will arrest you." In this
situation, you have a debt collector using the letterhead of the local
prosecutor's office (making it seem as if the letter is official government
correspondence) and threatening prosecution unless the debtor complies
with the request.
It seems pretty clear to me. Even if a specific percentage of people receiving
these letters are guilty of a crime under state law, the debt collectors
have no way of knowing the guilt or innocence of the debtor before the
letter is sent. Quite simply, whether legal action CAN be taken is an
unknown at the time the letter is sent -- this would appear to violate the law.
Now that the problem is getting some attention, it will be interesting
to see how state Attorneys General will react to this practice. I, for
one, would be embarassed to know this was taking place on my watch.