The Consumer Financial Protection Bureau issued an enforcement action against a debt collection agency that allegedly threatened borrowers with criminal prosecution and jail time if they failed to pay extra fees for writing bounced checks.
National Corrective Group and its chief executive, Mats Jonsson, contacted consumers who wrote bad checks without the proper approval of district attorneys, according to the CFPB. The San Clemente, Calif., company is said to have used prosecutors' letterheads to deceive consumers about illegitimate prosecution charges.
"The CFPB alleges that less than 1% of consumers who received final warning letters stating that their case was being forwarded for possible criminal prosecution were ever even referred to the prosecutor's office for possible prosecution," the bureau said in a press release Monday. "The company also threatened possible criminal prosecution where the amount of the debt was so low that criminal action would rarely or never occur."
The fraudulent letters also told borrowers that they had to enroll in a financial education class in order to avoid criminal charges. These type of classes typically cost $200, the CFPB said, which was often the amount of the alleged bad check debt.
"In reality, consumers are not typically at risk of prosecution, which rarely, if ever, occurs," the release said.
The bureau is requesting that a federal district court impose a $50,000 civil penalty against National Corrective Group, and require new consumer disclosures and oversight of its bounced check program.
Victim Services and American Justice Solutions, entities that purchased all the contracts and assets of National Corrective Group, were also included in the order. Jonsson is currently the top executive of both these firms' bad check diversion programs.
Efforts to find contact information for Jonsson or the companies were unsuccessful Monday.