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Anatomy of Bad Check Diversion Program

New America Media, Q&A, Annette Fuentes Posted: Mar 08, 2009

Editor's note: Each year, 2 million people a year receive letters bearing the official seal of their county district attorney after theyve bounced a checkeven for amounts as small as $30. The letters threaten prosecution if the recipient doesnt attend a finance class, for a hefty price. But the letters arent from any DAs office. They are from American Corrective Counseling Services, a private San Clemente, Calif., firm that contracts with DA offices to do a so-called "diversion" program for check bouncersostensibly for checks written for $100 or more but often for far less. The company makes millions and gives the DAs a cut of their profits, but its profits are based on questionable practices, like threatening criminal prosecution when it could not happen. ProPublica, a nonprofit investigative journalism organization, turned its reporting tools to the story of ACCS, which was published on its website and broadcast on a March 2 segment of CNNs Lou Dobbs Tonight. ProPublica reporter Mosi Secret spoke with NAM editor Annette Fuentes about how he found the story and why such consumer fraud has been occurring in plain sight for two decades, with the approval of district attorneys.

How did ProPublica come across this story of ACCS and its deceptive diversion programs for check bouncers?

I subscribe to various Web sites and RSS feeds that list lawsuits around the country. I heard about a lawsuit in New Mexico about an unrelated issue, and I called an advocate to talk about it, but he pointed me in another direction. He fumed about an ACCS case and I thought it was more interesting for me to pursue.

It is very shocking. Thats why the advocate was so outraged. It defies logic that an elected official--an elected prosecutorwhose job is to uphold the law would be engaging in such questionable practices. In the beginning, I gave the DAs the benefit of the doubt. But when we saw they were still sending out letters to people whose bounced checks were below the prosecution review threshold, it was pretty clear that what they were doing is ethically questionable.

ACCS has been contracting with district attorneys offices for two decades. Given that there have been many lawsuits challenging it, why is it still going strong?

I dont want to downplay the fact that bouncing checks is a problem. It is a problem prosecutors have to deal with. They are misdemeanors that take a lot of time to pursue, and there are more important crimes to pursue. They probably get a lot of flack from merchants, so this is an easy solution. The fact that they get money from outsourcing this is a benefit. The only people who complain are the consumers and most are so embarrassed they dont question it. Who would think getting a letter like this that it wasnt what it said? Even sophisticated people have gone through this.

You note that fewer people use checks these days as debit cards have become more prevalent. Who are the people most vulnerable to the ACCS deception?

I only write checks to my landlord for rent, and I use debit cards for rest. I get the sense that the people who are still writing checks are poorer folks. That is the sense I got from talking to folks for the story. I guess it is about balancing when the money goes in and out.

ACCS has contracts with 150 district attorneys in different states, but many of them seem to be here in California. Are we the capital of the bounced check deception?

There are definitely more counties in California that have contracts with ACCS. At least 20. That is partly because of state law, which has legislated that this practice can exist and this can be privatized.

That was back in 1985. The main people pushing against it now are those filing federal lawsuits. In California, they are also suing under the equivalent of the Fair Debt Collection Practices Act.

One reason I think it hasnt bubbled up for reform is that if someone became aware they were getting this letter from ACCS, they basically had two options: to go to Legal Aid or to go to a public defender.

Legal Aid will say, We only handle civil matters, and the public defender will say, We only handle felonies. It never comes to the attention of people who are advocates for those folks.

Are there parts of the country wary of this?

ACCS only has contracts in 15 states. Im not sure if that is because they have had resistance from DAs in those who dont have it or if it is because state legislation prohibits the practice. State law has to expressly permit this kind of relationship between the DA and this kind of company.

One of most disturbing aspects of your expose is that the company seems untouchable, because it uses its association with district attorneys as proof of its legality.

There is some truth to it. I wanted to make it clear that the prosecutors are behind this. If not for their questionably ethical practices, this wouldnt happen. It shouldnt provide a bulletproof defense for ACCS. The lawsuits have wound on for several years and have provided the only challenge to these practices.

What about merchants who sign up to use ACCS for debt collection? Is it mostly mom-and-pop stores or giants like Safeway? And do they really make out better by enrolling with ACCS to collect on bad checks they get?

In terms of the amount of checks processed, by far the big merchants like Safeway, Walgreens and Target, are turning over the most checks because they turn over the most volume. A lot of small merchants participate but they turn over fewer checks. There were 329 merchants in L.A. County using ACCS, so there are many small businesses. ACCS marketing materials say they have a 32 percent restitution rate, which they say is greater than what merchants would get if they went through a traditional debt collection company. Collecting on bad checks is not very profitable. And the merchants, like the DAs, arent paying either. That is the brilliance of ACCS idea.

You show the strong connection between ACCS and the National District Attorneys Association. Is that because ACCS bought their influence? Or is it that district attorneys need the money ACCS shares with them?

ACCS lobbied for one year before DAs started lobbying also to change the law, and it was not until the DAs got involved that legislation moved at all. I havent look closely at campaign contributions, but I dont think they would be large amounts because most states limit it.

DAs just have this power because they are elected officials. It would be a stretch to say ACCS bought their influence, but it would be fair to say they won their support.

What is the best way for people to protect themselves from this kind of consumer abuse?

The very best thing to do is to watch your finances, especially if youre in one of these jurisdictions. Be aware of your accounting. If you get one of these notices, write the consumer protection division of the attorney general in your state to file a complaint. If several people file complaints, AGs take notice. Some people have had success going back to merchants, but they are not supposed to accept payment after theyve signed up with ACCS.

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