SAN FRANCISCO (CN) - A federal class action claims that a California company unfairly collects debts by paying district attorneys for use of their seals and letterheads, disguising private debt collection as law enforcement.
Lead plaintiff Kevin Breazeale claims that defendant CorrectiveSolutions does this to "scare consumers into believing that they are the subject of real criminal proceedings."
What's more, Breazeale says in the lawsuit, "Just a few weeks ago, moreover, the American Bar Association issued a formal ethics opinion condemning the practices of companies like CorrectiveSolutions and concluding that they are engaged in the unauthorized practice of law ."
Named as defendants are Victim Services Inc. and the National Corrective Group, both dba CorrectiveSolutions.
"They are paying prosecutors for the permission essentially to pretend that they're prosecutors," plaintiffs' attorney Paul Arons told Courthouse News.
"Basically, they're telling prosecutors that they're acting unethically if they permit this non-lawyer company to pretend they're the prosecutors," Arons said.
According to the lawsuit, CorrectiveSolutions usually receives referrals from retailers and private collection agencies, not from district attorneys. Their major referral sources include national retailers such as Target and Safeway, and large debt collection entities such as Telecheck and Certegy, according to the complaint.
These sources provide CorrectiveSolutions with consumers' check information, which the company uses to generate form collection letters that appear as if they are sent from a district attorney's office, according to the lawsuit.
Members of the proposed class of consumers may have presented checks that did not clear, but this is not a crime under California's Bad Check Diversion Act unless there is probable cause to believe that the consumer presents the check "willfully, with intent to defraud," according to the complaint.
The class claims that CorrectiveSolutions informs them, incorrectly, that they are accused of crimes punishable by up to a year in prison and that they can avoid it by participating in a "Bad Check Restitution Program."
CorrectiveSolutions also contacts check writers by email and telephone, "frequently repeating or amplifying their prosecution threats," the class claims.
They claim that the "driving force" behind CorrectiveSolutions's demands is to charge an unlawful fee of $160 or more for a Financial Accountability Class, which is not required.
CorrectiveSolutions' contract with El Dorado County District Attorney's Office is attached as an exhibit to the complaint. The class claims that the contract "reflects the fees CorrectiveSolutions charges throughout California:"
"Administrative fee: $50
"Diversion seminar fee: $191 with automatic 3% annual increase
"Restitution fee: $15 maximum, based on merchant's bank charge
"Credit/debit card fee: $10
"Payment Plan late fee: $10
"Class rescheduling fee: $25
"Overpayment refund fee: $5
"None of these fees are lawful because defendants' program does not comply with the Diversion Act's prerequisites," the complaint states. (Citation to exhibit omitted.)
The plaintiffs estimate that the proposed class contains more than 100,000 members.
Sources from CorrectiveSolutions could not be reached for comment.
The plaintiffs seek class certification, restitution, costs, statutory damages, and damages for violations of the California Business and Professions Code and the Fair Debt Collection Practices Act.
Arons, of Friday Harbor, Wash., represents the plaintiffs along with Beth Terrell, of Terrell Marshall Daudt & Willie, of Seattle.
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