CorrectiveSolutions' Checkmate

Prosecutors nationwide team up with the San Clemente debt collector to terrorize consumers in ways both highly profitable and usually sketchy

"While the rest of us are playing by the rules, they aren't," Schiffman says.

Consumer advocates and legal experts were naturally horrified. "You don't hand out guns and badges to just anyone," says Adam Levin, former consumer-affairs commissioner of New Jersey. "And this is effectively creating a gun-and-badge situation for people who frankly not only don't deserve it, but also have a long history of abusing it."

Paul Arons, a Washington state consumer-rights lawyer, agrees. What's startling, he says, isn't the shady tactics of companies such as CorrectiveSolutions; it's the fact that district attorneys, charged with protecting the public good, are abetting the deception. "Check collectors have a long history of running scams such as pretending they'll have people arrested or that they are with government agencies," he says. "I was shocked to find out that prosecutors were actually authorizing check collectors to do this in district attorneys' names."

Carole Hirth
Will Rice
Carole Hirth

Congress did include a small caveat in the 2006 bill that was supposed to protect citizens. "The prosecutor must determine that probable cause exists to charge a person with a crime before the program sends the letter," Levin says. Unfortunately, they're universally blowing this off.

Take the Riverside County DA's office. Chief Deputy Vicki Hightower says her program is meant to target bad-check writers who intend to defraud victims, not well-meaning people who accidentally bounce a check. "We understand the concerns people have," Hightower says. "That's why we review the checks before they go to CorrectiveSolutions. And while the correspondence that goes out has our logo, it does say that the program is administered by a third-party vendor."

Yet her words don't appear to match the facts on the ground. In order to open a bad-check case in Riverside County, merchants only need to provide the check writer's information, along with the assurance they tried contacting them at least once. But its own records show it is routinely threatening jail time for people who've done nothing criminal. During the first 10 months of 2012, CorrectiveSolutions sent out 8,973 letters on the county's behalf. Just 23 of those cases were deemed worthy of prosecution.

Florida's Miami-Dade County is even more lax. There, merchants' complaints go directly to CorrectiveSolutions, which then decides which ones merit prosecution. "Our office has set the intake criteria for checks to be accepted into the program," says Assistant State Attorney Marie Jo Toussaint. "This criteria insures that only checks that have violated our Florida statutes are eligible for this pre-arrest diversion program."

Again, the records say otherwise. Of the 1,863 cases opened by CorrectiveSolutions, only 106 were actually filed in criminal court.

"There is no question that defrauding someone is a crime," says Kara Dansky, an ACLU lawyer. "But in these circumstances, there is no evidence that's what happened. People could have written a check on accident, with no intent to defraud. But the DA isn't investigating that. . . . Instead, debt-collection companies are using the auspices of the DA's office to threaten someone with jail when there is no investigation."

*     *     *

CorrectiveSolutions had good reason to buy immunity from Congress. At the time, the industry was losing one class-action lawsuit after another.

In 2004, Kristy Schwarm was a stay-at-home mother of five, with another child on the way. Over the course of one week, the Ukiah mom wrote a check to Walmart for $69.26 and one to FoodMaxx for $83.41, as well as made an ATM withdrawal, according to court records. Unfortunately, the ATM withdrawal overdrew her account, racking up seven rejected checks and 21 overdraft fees totaling $560.

"It had a snowball effect, leaving the account continually overdrawn, even though I made several deposits," Schwarm says in court documents. Her bank erased most of the fees.

But a few months later, Schwarm received a letter from the Mendocino County district attorney. She had been accused of fraud and was ordered to repay the checks, along with penalties and a "diversion fee."

"I was in a panic," Schwarm said in court documents. "I had never been in trouble with the law before. . . . I assumed that I must be in a lot of trouble if I was getting a letter from the district attorney that I could be arrested."

Schwarm called the number on the letter, assuming she was speaking with someone from the DA's office. She promised to pay as soon as she could. But with her husband out of work and eight mouths to feed, she just kept falling further behind. A year later, she still hadn't paid her debts. The letters and phone calls kept coming.

Then she was pulled over in a traffic stop with her six kids in the car. Schwarm was sure it had to do with the letters. "I was terrified. I thought . . . my children were going to see me get handcuffed and taken away," she said. "I was giving my children instructions on calling their father to come pick them up when I found out I was just being warned for not coming to a complete stop at an intersection."

By that point, she was so deep in debt that she filed for bankruptcy. Only after she consulted an attorney did she discover it wasn't the DA sending her all those letters. It was an Arkansas company called District Attorney Technical Services. "The real district attorney had not investigated me or considered filing charges against me," she said.

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