Debt Collectors Using Local Prosecutors' Letterhead to Collect Debts

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.

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