By On the occasion of our 20th anniversary
By Gustavo Arellano
By R. Scott Moxley
By Alfonso Delgado
By Courtney Hamilton
By Joel Beers
By Peter Maguire
By Charles Lam
Julie Orr has plenty of reasons to bounce a check.
In just a few years, she has gone from running a successful advertising business to being a single mom on disability. Hers is a dilemma of American life: A leg injury keeps her from working, but she can't afford the surgery without health insurance.
Yet Orr says her woes weren't what led her to write a bum check at the grocery store. "Sure, we've fallen on tough times," says the 54-year-old from Riverside. "But I've never bounced a check before in my life. I've always been on top of my finances."
Accidentally overdrawing on a bank account isn't a crime. It is, however, a hyper-lucrative business, allowing banks to collect $30 billion per year in overdraft fees while their customers frantically swim back to the surface. Such is the bounty of faulty math.
Orr was shocked when she received a letter from the Riverside County district attorney's office accusing her of fraud. In May, she had written a check for $91 at an Albertsons. A few days later, while reviewing her bank account, she noticed the check had bounced. Orr headed back to Albertsons to make good on her payment. But she was told the store had already placed her in collections. It was out of the grocer's hands.
A month later, Orr received a letter from the county DA's office. It inexplicably accused her of intent to commit fraud, noting she was now eligible for "up to one year in the county jail." The only way to avoid criminal charges: participate in a "voluntary" bad-check-restitution program.
"The letter really made me think I'd go to jail if I didn't," she says.
But the DA wanted more than the store's $91 back. Though California law restricts the penalty on bad checks to $25, the letter demanded $333.51, which included $175 for a "voluntary" financial-accountability class she'd have to take.
Orr didn't even consider arguing her innocence. She just wanted the problem solved. So she called the 1-800 number on the letter to make arrangements to pay in cash at the sheriff's department. When she was told she could only send a check to a P.O. box, Orr grew suspicious.
"That's when I asked if I was actually talking to someone in the DA's office," she says. "And they said no, that they were a company being paid to represent the DA."
In fact, Orr had contacted CorrectiveSolutions, a private, San Clemente-based company. According to its website, it handles bad-check cases for 140 district attorney's offices nationwide, jurisdictions that oversee 65 million people, from Colorado to Florida, Michigan to Washington.
Consider it the privatizing of justice. Instead of investigating bad-check complaints, prosecutors simply pass them along to CorrectiveSolutions. The company then uses official DA letterhead to threaten jail time if consumers don't pay up. CorrectiveSolutions also runs the "voluntary" financial-accountability classes, and prosecutors get a cut of the profits while barely lifting a finger. The entire system runs on a one-size-fits-all presumption of guilt. No one's bothering to investigate whether the check writer was working a scam or merely suffering from a momentary lapse of mathematics.
Orr emailed CorrectiveSolutions, saying she'd be happy to repay the $91, plus a $50 fee. But she wanted to skip the "voluntary" class. She simply couldn't afford it.
CorrectiveSolutions didn't respond—and the threatening letters kept coming.
"When no one wrote me back, I'd had it," Orr says. "I'd tried everything, even calling the district attorney's office directly. No one could help me. I just don't see how this is right or even legal."
* * *
Debtors' prisons were outlawed in 1833, when America decided it was counterproductive—as well as a waste of time and money—to imprison people for being broke. Despite myth to the contrary, most people avoid bills simply because they can't pay them, not because they're on the make.
"There was a [federal] study done in 1974 about why people didn't pay their debts," says Bob Hobbs, deputy director of the National Consumer Law Center. "And the number of people who could but didn't pay their debts was 0.4 percent. . . . The most typical reasons were they lost their jobs, got divorced. Some overspent, but were encouraged to. Others got cheated, and so on and so forth. Some people had even died. It's not right, but it's life. And it's the cost of doing business."
So Congress passed the Fair Debt Collection Practices Act in 1978, barring collections agencies from threatening jail time and deceiving consumers.
"We have members that collect on behalf of the government, from federal student loans to meter fines," says Mark Schiffman of the Association of Credit and Collection Professionals, the industry's largest trade association. "We can't put the logo of a government agency on our letterhead. We can't say we're from the Department of Education. We have to say we're 'ABC,' a company working on behalf of the Department of Education."
Yet Congress created a loophole in 2006, granting what amounts to immunity from deception charges for collection agencies working on behalf of law enforcement.
CorrectiveSolutions paid handsomely for the bill. Between 2003 and 2006, the company spent more than $660,000 on lobbying. It also slathered donations on key senators such as Christopher Dodd (D-Connecticut), who would later leave office after accepting a sweetheart deal from a mortgage company. The exemption essentially allowed such companies as CorrectiveSolutions, BounceBack and Check Diversion Program to operate above the law. They can send out notices on DA letterhead, threaten people with jail time and rake in upward of $200 in fines per person. And it's all perfectly legal.