"I already paid them," Hirth says. "I contacted [the grocery store's] ethics department and said this was just wrong. I spend enough money there. I told them they should work with me. I told them to look up my Safeway card. I've been shopping with them for the past 30 years!"

Safeway said there was nothing it could do. She'd have to contact the state attorney's office.

Hirth called the 1-800 number on the letter but got nowhere.

Carole Hirth of Chicago ran foul of Corrective Solutions when PNC Bank held deposits to generate overdraft fees.
Will Rice
Carole Hirth of Chicago ran foul of Corrective Solutions when PNC Bank held deposits to generate overdraft fees.

"They accused me of committing a fraudulent act. They said that if I don't pay everything and take their class, I could be arrested and end up in jail. He was very, very mean. I told him that I didn't understand how that could happen. I said I'd already handled it, it should be cleared up, but he just went on and on and on."

Hirth wrote another letter to Safeway, begging the grocer to contact the prosecutor's office on her behalf. The letters and phone calls kept coming.

It wasn't until she got in touch with Arons that she discovered she wasn't being threatened by Cook County. It was Corrective Solutions, which has contracts with 21 counties in Illinois.

In 2010 yet another class-action suit was filed against the company, this time on behalf of 600,000 victims in California and Pennsylvania. In November, it agreed to pay a $3 million settlement. But because the class was so big, each victim would receive less than $3 dollars. A federal court refused the settlement, ordering both parties back to negotiations.

"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."

Will the Feds Step Up?
As the case languishes in court, advocates hope Congress will finally close the 2006 loophole.

They received a glimmer of hope in October, when President Obama's new Consumer Financial Protection Bureau announced that 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 a 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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5 comments
suetoo
suetoo

There's so much fraud in the U.S. these days it just nothing but sad.  

On a lighter note, Mike Wilhelm closed his LinkedIn account.  I guess people who read this were writing and bugging him.  What goes around comes around.  Creep.

a42natson
a42natson

Easy fix: Keep a couple hundred bucks extra in your account to cover your errors.  Don't have a couple hundred extra dollars?  Pay with money orders and cashier's checks until you reach maturity.

mimivonlichenstein
mimivonlichenstein

@a42natson what a terribly judgemental thing to say!   Keep a couple hundred bucks extra in your account??....until you reach maturity??...wow!   Not everyone has EXTRA money. 

j__M__M
j__M__M

@a42natson Easy fix: Just be a trust fund baby and tell the lawyers to keep at least a hundred g's or so in checking at all times.  Problem solved.

Everything is so easy... 


 
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