9th Circuit Allows Lawsuit Against Collection Agency

     SAN FRANCISCO (CN) – A private collection company used by the Santa Clara district attorney may be sued for its allegedly aggressive tactics, the 9th Circuit ruled.

     The county hired American Corrective Counseling Services as an independent contractor to handle its bad check diversion program. ACCS provides a staff to call debtors, runs financial education courses for bad check writers and keeps all the program files. In exchange, it collects a $100 class fee, 60 percent of all administrative fees, plus other fees and late charges.
     Debtors filed a class action accusing ACCS of sending strongly worded letters that threatened time in court if debtors refused to cough up the amount they owed plus collection fees.
     ACCS argued for immunity on the grounds that it acts as an arm of the state, since the district attorney administered the program.
     The appeals court rejected this claim, stating, “A contractor like ACCS may perform some functions for the state, but is certainly more removed from state power, and from democratic control, than a county … It would thus be strange to award private entities sweeping immunity from the suit.”     

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