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CorrectiveSolutions' Checkmate

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

"The litigation has been hard," says Bob Hobbs, deputy director of the National Consumer Law Center. "Either these companies declare bankruptcy, or they just drag these things on forever, and no one gets paid."

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As the case languishes in court, advocates hope Congress will finally close the 2006 loophole.

Julie Orr
Rodrigo Peña
Julie Orr
Adam Levin
Adam Levin

They received a glimmer of hope in October, when President Barack Obama's new Consumer Financial Protection Bureau announced it would be overseeing debt collectors, starting this year. For the first time in history, the feds will require those making more than $10 million per year to supply regular reports to ensure they're not deceiving and threatening consumers.

Still, Moira Vahey, an agency spokeswoman, declined to comment on how it would deal with the bad-check programs.

For now, the only oversight comes from those making money on the deals: the district attorneys themselves. And they show little interest in policing the industry.

Take the Minnesota company once known as Financial Crimes Services. In 2009, it was sued for violating the Fair Debt Collection Practices Act. The company agreed to pay $75,000 in penalties and court costs.

Last year, it changed its name to Check Diversion Program, and it's still operating throughout Minnesota and Wisconsin. "We're not a debt-collection company, but a diversion program," says CEO Scott Adkisson. "We send out approved letters. And it's the DA's decision who gets them, not ours. We just manage the program."

The evidence suggests otherwise. In Minnesota's Goodhue County, the program is run by the Red Wing Police Department, which referred inquiries back to Adkisson. Minnesota Attorney General Lori Swanson would not respond to interview requests, either.

Levin believes this lack of oversight may be the key to dismantling the programs: If prosecutors aren't reviewing the cases, collection agencies aren't legally eligible for immunity.

In the meantime, victims such as Orr, Schwarm and Hirth have little recourse but to hire lawyers, paying thousands to defend themselves for bouncing $50 checks at the grocery store.

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