SCRANTON, Pa. (CN) - A federal class action claims a collection agency uses district attorneys' letterheads to threaten debtors with jail time in a "bad check restitution program" - and that the district attorneys allow it. The class says"approximately twenty" Pennsylvania counties have contracts with the National Corrective Group, allowing the collectors to use the "district attorney brand." The class says such contracts are unconstitutional, as they violate due process.
The class sued Lackawanna County District Attorney Andrew J. Jarbola III and the National Corrective Group (NCG). It claims that on March 31, 2009, NCG assumed the "duties and responsibilities under its contracts with Pennsylvania district attorneys" from its predecessor, American Corrective Counseling Services. "NCG has continued to operate the bad check restitution program in Lackawanna and other counties in the same, or substantially the same manner as ACCS.
"Pursuant to this contract, Defendant Jarbola permits NCG to use his office, his official letterhead and his signature in communicating with individuals who have issued checks which have been dishonored. NCG thereupon uses the district attorney's identity in threatening prosecution and imprisonment, stating or implying that criminal charges have been filed and that court appearances will be required, and stating that payments are due that far exceed the amount of the dishonored check. These notices are sent for the purpose of collecting private debt as well as fees to the Defendants. NCG has the same arrangement with certain other Pennsylvania district attorneys.
"Through its ability to use the "district attorney brand" and its superior performance relative to other debt collectors, NCG solicits and then receives from merchants reports of debts owed to them due to dishonored checks," according to the complaint.
After receiving a complaint from a merchant or other creditor, "NCG sends the individual accused of writing the dishonored check a notice, ostensibly from the district attorney, on official district attorney letterhead, with a reproduction of the district attorney's signature," threatening the debtor with criminal prosecution, the complaint states. It adds that the complaints "are never reviewed by any employee of the district attorney. NCG alone evaluates the complaints and initiates participation in the bad check restitution program. It has a purely financial incentive in doing so."
In threatening criminal prosecution, NCG's demand letter states that if the recipient "may contact 'the District Attorney's Bad Check Restitution Office' at a toll free number or fax or mail a written dispute within 30 days to a fax number or post office box. The phone and fax numbers provided, as well as the P.O. box, connect the individual with representatives of NCG in California, not with defendant Jarbola's or any other district attorney's office," according to the complaint.
In violation of Pennsylvania law, NCG's demand letters say the debtor may not pay the merchant directly. The complaint adds: "These notices are sent for the purpose of collecting private debt as well as fees to the Defendants. NCG has the same arrangement with certain other Pennsylvania district attorneys."
The class claims that Jarbola and other district attorneys "have also authorized NCG to use their name, signature and letterhead to charge individuals numerous incidental fees over and above an administrative and accountability class fee. These incidental fees include late payment fees, rescheduling fees, Payment/Convenience fees and Overpayment/Handling fees.
"Pursuant to the contract with NCG, Defendant Jarbola receives 100% of the administrative fees generated by NCG. NCG receives 100% of the class fees and incidental fees."
The two named plaintiffs say they each had to pay more than three times the amount of their alleged debts in fees. They say they were never informed that the "restitution program" was voluntary and never were told that they were being contacted by a debt collection agency.
In the past two years, approximately 12,000 people have been harassed into participating in the "program," according to the complaint.
"Neither defendant Jarbola nor other Pennsylvania district attorneys have the authority under Pennsylvania law to operate a pre-charge, extra judicial diversion, restitution or debt collection program, nor are the fees charged pursuant to such programs authorized by law. Most Pennsylvania district attorneys have declined to participate in NCG's scheme," the complaint states.
"Pennsylvania has authorized, through state rule, diversion programs which require that criminal charges first be actually filed and which require judicial oversight and approval."
The class seeks an injunction and damages for violations of the state and federal constitutions, violations of the Fair Debt Collection Practices Act, misrepresentation, unfair trade, and other charges. Their lead attorneys are Donald Driscoll and Margaret Schuetz with the Community Justice Project of Pittsburgh.
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