Pennsylvania Settles With Bankrupt Debt Collector for $2.5 Million

American Corrective Counseling Services posed as District Attorney in letters to check bouncers

By Jon Hood
ConsumerAffairs.com

November 5, 2009

• Pennsylvania Settles With Bankrupt Debt Collector for $2.5 Million • New York Wins Case Against Debt Settlement Company • Illinois Sues Another Debt Settlement Company • New York Gets Tough With Debt Collectors • New York Shuts Down Debt Collection Ring • New York Subpoenas Debt Settlement Companies • Illinois Sues Two Debt Settlement Firms • Defend Yourself Against Debt Collectors • New York Sues Process Server for High-Volume Debt Collectors • Texas Charges JK Harris with Misrepresentation • No Company Can Erase Bad Debt • Debt Settlement Comes With Hefty Fees --- • More about debt settlement ...

According to the plaintiffs, ACCS has spent the past few years fraudulently telling consumers they were in danger of prosecution for writing bad checks, and offering to clear up the problem in return for a fee. The company's letters were designed to look like they were sent by a Pennsylvania District Attorney's office, and told consumers who bounced checks that they were required to pay fees and attend a "financial accountability class." In many cases, the letter indicated that the class itself cost nearly $200.

The letters were misleading and manipulative, according to Donald Driscoll, an attorney for the plaintiffs. Driscoll, of the Pittsburgh-based Community Justice Project, said that consumers who bounce checks are only subject to prosecution if the act was intentional.

American Corrective Counseling Services (ACCS) admits no wrongdoing under the agreement.

The Pennsylvania settlement is only the latest in a series of lawsuits concerning the company's scheme. Public Citizen, another consumer advocacy group, has brought similar suits against ACCS in Florida, California, and Indiana. Deepak Gupta, a Public Citizen attorney, called the company's practices "a misuse of public authority" and "a scam." He said ACCS is, for all intents and purposes, "renting out the name and authority of the prosecutor."

In fact, the company did contract with District Attorney's offices in a number of states, with DAs receiving a portion of fees collected by ACCS. These kickbacks added up -- Los Angeles alone has collected $1 million in the past four years.

A contract between ACCS and the San Bernadino, California, District Attorney, provides that ACCS will oversee the diversion seminars, and provide counseling services and administrative assistance to the DA. The contract goes on to state, however, that the DA retains its full prosecutorial discretion, and must approve in advance any mailings sent out regarding fees or the diversion program. ACCS's actions appear to be in direct contravention of that contract.

Gupta said he doesn't think District Attorneys were aware of the company's wrongdoing. "There have been prosecutors who've looked into this and realized what's going on and dropped it," he said.

ACCS sent out about 2 million letters per year, threatening cash-strapped consumers with prison and considerable fines unless they complied with the letter's orders. Many letters contained the bold, all-caps heading, "Official Notice -- Immediate Action Required," and went on to detail the sobering consequences of a failure to pay up.

A sample letter to a Florida consumer warns that "a felony conviction under this statute [for writing bad checks] is punishable by up to five (5) years in prison and/or a fine of up to $5,000. Misdemeanor crimes are punishable by up to sixty (60) days in jail and/or $1,000 in fines." The letter goes on to promise that "[the District Attorney's Office] will not initiate prosecution proceedings against individuals who comply with the diversion program."

ACCS, based in California, filed for Chapter 11 bankruptcy in January, likely in response to the lawsuits. The company has since reorganized as the National Collective Group, under which, according to Gupta, it continues its scam unfazed. ACCS's insolvency means that any settlement funds will come from the company's insurer.

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