The Consumer Financial Protection Bureau (CFPB) Monday announced an enforcement action against a nationwide debt collection operation and its CEO for using deceptive threats of criminal prosecution and jail time in the collection of debts stemming from bounced checks. The proposed order, to settle FDCPA and other charges, includes a $50,000 civil penalty.
“National Corrective Group masqueraded as prosecutors and used deceptive tactics to intimidate consumers into paying hundreds of dollars in extra fees to avoid potential criminal prosecution,” said CFPB Director Richard Cordray. “Today we are taking action to put a stop to these illegal debt collection practices.”
In a proposed order dated March 27, which still needs final approval from a judge, the CFPB alleges that California-based National Corrective Group (NCG) deceived consumers by sending collection notices on prosecutors’ letterheads and creating the false impression that consumers may be prosecuted for writing bounced checks. Many of the letters went to consumers before any district attorney had determined prosecution was likely.
State and district attorneys’ offices often offer diversion programs to people accused of writing bad checks as a way for the individuals to avoid criminal prosecution. Many bad check diversion programs are run by companies, like NCG, that enter into contracts with state and local prosecutors’ offices to collect bounced check debt. Under the law, a company operating a bad check diversion program cannot contact a consumer about the program until a prosecutor’s office has reviewed the case and determined the consumer is eligible.
The CFPB alleged that the defendants violated the Fair Debt Collection Practices Act (FDCPA) by making misrepresentations to or deceiving consumers. The CFPB also alleged that the defendants violated the Dodd-Frank Wall Street Reform and Consumer Protection Act, which prohibits deceptive acts or practices in the consumer financial marketplace.
NCG is the successor company to Corrective Solutions, a check collector that previously had legal issues. Corrective Solutions was itself a successor to American Corrective Counseling Services, Inc. (ACCS). The CFPB’s suit names NCG as the defendant company, but the business now operates under the names Victim Services Inc. and American Justice Solutions, Inc., all run by CEO Mats Jonsson, also named in the suit.
In addition to a civil penalty of $50,000, NCG and its operating entities would reform their practices under the order. This includes prohibiting the companies from stating or implying that they are a state or district attorney and plainly disclosing the company name in consumer communications, prohibiting threats of imprisonment, and prohibiting the use of district attorney letterhead in written communications.