A class-action lawsuit filed in California accuses CorrectiveSolutions of unfairly collecting debts by paying district attorneys to use their letterheads and seals.
Lead plaintiff Kevin Breazeale claims that CorrectiveSolutions engages in the practice to "scare consumers into believing that they are the subject of real criminal proceedings."
CorrectiveSolutions, based in San Clemente, Calif. in Orange County, usually receives referrals from retailers and private collection agencies, not from district attorneys. The company's major referral sources include national retailers such as Target, and large debt collection entities such as Telecheck and Certegy, according to the complaint.
These companies provide CorrectiveSolutions with consumers' check information, which the company uses to generate collection letters that appear as if they are sent from a district attorney's office, according to the lawsuit.
The class claims that CorrectiveSolutions incorrectly informs them that they are accused of crimes punishable by at least a year in prison and that they can avoid that by taking part in a "Bad Check Restitution Program."
Victim Services Inc. and the National Corrective Group, both dba CorrectiveSolutions, are named as defendants. CorrectiveSolutions' contract with El Dorado (Calif.) County District Attorney's Office is attached as an exhibit to the complaint.
Officials at CorrectiveSolutions could not be immediately reached for comment.
Alameda County (Calif.) District Attorney Nancy OMalleys office said its arrangements with CorrectiveSolutions were both legal and productive. A spokeswoman in the office said the consumers, for the most part, are not innocent check writers but people who have ignored collection attempts.
CorrectiveSolutions submits a list of those cases each month, and the district attorneys office reviews them and tells the company which debtors it can contact on behalf of the office.
The American Bar Association recently issued an ethics opinion condemning the practices of companies that engage in such deals, concluding they are engaged in the unauthorized practice of law. The ABA has found a growing practice of local prosecutors allowing collection agencies to send demand letters - suggesting they came from the prosecutor's office. Doing so violates ABA's professional conduct rules.
The letters sometimes threaten prosecution and steer the consumer to a fee-based personal finance class. The prosecutor's office often gets a cut of the money generated from the finance class.
"Typically, no lawyer in the prosecutors office reviews the case file to determine whether a crime has been committed and prosecution is warranted or reviews the letter to ensure it complies with the Rules of Professional Conduct prior to the mailing," according to the written opinion from ABA's Standing Committee on Ethics and Professional Responsibility.
The lawsuit against CorrectiveSolutions claims the company contacts check writers by email and telephone, "frequently repeating or amplifying their prosecution threats." They claim that the intent behind CorrectiveSolutions's demands is to charge an unlawful fee of $160 or more for a Financial Accountability Class, which is not required.
Members of the proposed class of consumers may have presented checks that did not clear, which is not a crime under California's Bad Check Diversion Act unless there is probable cause to believe that the consumer presents the check "willfully, with intent to defraud," according to the complaint.
The plaintiffs estimate that the proposed class contains more than 100,000 members. They seek restitution, costs, statutory damages and damages for violations of the Fair Debt Collection Practices Act and the California Business and Professions Code.