Bad Check Restitution Program
Encyclopedia
A bad check restitution program is a program that works to retrieve funds from bad check writers in order to repay moneys owed to the recipients of the checks. These programs are run by prosecutors in jurisdictions across the country.
About half of all U.S. states offer some type of Bad Check Restitution Program, and these services vary in many ways. Some accept NSF, and closed account checks while others may accept stopped payment checks and markers. It will also be noted that most have time limits (checks may need to be less than 90 or 180 days old and most need to be at least 30 days old and have had to have notice to check maker that the check has been returned unpaid with a demand for payment in a specified time). Some will not accept checks that were written under certain circumstances, including a post-dated check, one that the check writer asked the recipient to hold, or one that was written as an extension of credit.
's office) that the check writer has committed a criminal act, and is subject to prosecution. The check writer is told that s/he may avoid prosecution by meeting the guidelines of the program, which generally include the payment of all monies owed to the victim, a program fee, and in some jurisdictions, participation in a course designed to improve the check writer's habits.
Generally, enrollment in the program is not an admission of guilt to a crime, and will not result in criminal charges being filed or a criminal record. The check writer is told that if s/he successfully completes all program requirements, the case against him/her dismissed without any possibility of arrest, criminal charges or a record thereafter.
Bad Check Restitution Programs have an important place in recovering bad checks. They help businesses recover hundreds of thousands of dollars each year throughout the United States. Most Prosecutor offices try to make these programs free to taxpayers (i.e. bad check collection is funded by fees paid by bad check writers).
and district attorney
s, BCRPs are diversion program
s operated by the county, state, or other jurisdiction that are responsible for collecting funds owed to victims . They claim the purpose is to recover the losses of the victims.
Many consumer advocates oppose the actions of BCRPs, particularly those operated by private, for-profit companies, stating that bad check writing is not a crime unless the check writer actually intended to defraud the recipient. The writer of the bad check is told that the use of the program is optional, but is falsely threatened that the options are to participate, or risk going to jail
. The writer is usually informed within the letter that entering the program is not necessary, and it is permissible to stand trial, even though no charges have been, or are likely to be filed.
Sometimes the program is handled internally by the law enforcement agency itself, which often generates a substantial portion of its overall budget from the check fees that it collects . In many cases, the law enforcement agency signs up with a private collection agency
. The private company essentially pays the law enforcement agency a small portion of the fees it collects
in exchange for permission to send demand letters on official law enforcement agency letterhead and to threaten to prosecute check writers who do not pay up to $200 in fees, plus the check itself. This is when, in most instances, there was no criminal case to dismiss, and no law enforcement official had reviewed the check writer's file to determine if there was evidence of a crime .
On December 13, 2010, a California jury returned a verdict in favor of a corporation and two individually named defendants on a claim for $30 million in actual damages under the Federal Fair Debt Collection Practices Act. The defendants, who were sued in a 670,000-person class action brought in the United States District Court for the Northern District of California, were held not liable for any actual damages, though the Court tentatively awarded each named member of the class the sum of $1 dollar in nominal damages.
The case was brought by class members who had been participants or offered a chance to participate in California's Bad Check Diversion Program against defendants who contracted with several California District Attorneys to administer the program. The plaintiffs claimed they were entitled to return of fees they paid into the program to avoid prosecution, asserting that the notice letters mailed by the defendants violated Federal fair debt collection standards because they contained a threat of prosecution of all who did not pay the fees.
In closing arguments, counsel for the plaintiff class contended that trial made legal history and that it was the "largest FDCPA class action ever tried."
In a lead up to the trial, on June 3, 2010, a California federal court ruled that defendants violated federal and state law by operating a bad check restitution program in which they sent letters on district attorney letterhead, threatened proseuction and charged fees for a "diversion class." (del Campo v Mealing, 5:01-cv-21151, (USDC ND Cal.) but the judge in the case, James Ware, reversed this ruling and ordered a new trial, stating he learned new information during the trial that conflicted with his earlier ruling against them.
In most states, criminal intent is determined if the victim of the bad check attempts to notify the writer of the bounced check and the check writer does not make good on it within a specified period of time. Writing a check on an closed account establishes intent to defraud.
In several lawsuits in federal court in Michigan, California, Indiana, Florida, Iowa and other states, consumers have charged that the program is rife with illegal and unfair collection practices, and is an abuse of government power. In a lawsuit in Iowa, Liles v. American Correcive Counseling, Inc., the check diversion company agreed to refund money to class members. In a lawsuit in Michigan, Gradisher v. Check Enforcement Unit, Inc., 210 F. Supp. 2d 907 (W.D. Mich. 2002), the court ruled that the collection practices violated the federal Fair Debt Collection Practices Act
. On May 2, 2008, in Schwarm v. Craighead, Civ. No. 05-1304 (E.D.Cal), the United States District Court ruled that the bad check restitution program that was operated in two dozen California counties violated the Fair Debt Collection Practices Act in a variety of ways, including making false threats of prosecution, and charging illegal fees. A lawsuit brought in Indiana was dismissed.
About half of all U.S. states offer some type of Bad Check Restitution Program, and these services vary in many ways. Some accept NSF, and closed account checks while others may accept stopped payment checks and markers. It will also be noted that most have time limits (checks may need to be less than 90 or 180 days old and most need to be at least 30 days old and have had to have notice to check maker that the check has been returned unpaid with a demand for payment in a specified time). Some will not accept checks that were written under certain circumstances, including a post-dated check, one that the check writer asked the recipient to hold, or one that was written as an extension of credit.
Methods
A Bad Check Diversion Program generally pursues the bad check writer by stating (typically from the local District AttorneyDistrict attorney
In many jurisdictions in the United States, a District Attorney is an elected or appointed government official who represents the government in the prosecution of criminal offenses. The district attorney is the highest officeholder in the jurisdiction's legal department and supervises a staff of...
's office) that the check writer has committed a criminal act, and is subject to prosecution. The check writer is told that s/he may avoid prosecution by meeting the guidelines of the program, which generally include the payment of all monies owed to the victim, a program fee, and in some jurisdictions, participation in a course designed to improve the check writer's habits.
Generally, enrollment in the program is not an admission of guilt to a crime, and will not result in criminal charges being filed or a criminal record. The check writer is told that if s/he successfully completes all program requirements, the case against him/her dismissed without any possibility of arrest, criminal charges or a record thereafter.
Bad Check Restitution Programs have an important place in recovering bad checks. They help businesses recover hundreds of thousands of dollars each year throughout the United States. Most Prosecutor offices try to make these programs free to taxpayers (i.e. bad check collection is funded by fees paid by bad check writers).
Criticism of BCRPs
According to law enforcement agenciesLaw enforcement agency
In North American English, a law enforcement agency is a government agency responsible for the enforcement of the laws.Outside North America, such organizations are called police services. In North America, some of these services are called police while others have other names In North American...
and district attorney
District attorney
In many jurisdictions in the United States, a District Attorney is an elected or appointed government official who represents the government in the prosecution of criminal offenses. The district attorney is the highest officeholder in the jurisdiction's legal department and supervises a staff of...
s, BCRPs are diversion program
Diversion program
A diversion program in the criminal justice system is a program run by a police department, court, a district attorney's office, or outside agency designed to enable alleged offenders of criminal law to avoid criminal charges and a criminal record...
s operated by the county, state, or other jurisdiction that are responsible for collecting funds owed to victims . They claim the purpose is to recover the losses of the victims.
Many consumer advocates oppose the actions of BCRPs, particularly those operated by private, for-profit companies, stating that bad check writing is not a crime unless the check writer actually intended to defraud the recipient. The writer of the bad check is told that the use of the program is optional, but is falsely threatened that the options are to participate, or risk going to jail
Jail
A jail is a short-term detention facility in the United States and Canada.Jail may also refer to:In entertainment:*Jail , a 1966 Malayalam movie*Jail , a 2009 Bollywood movie...
. The writer is usually informed within the letter that entering the program is not necessary, and it is permissible to stand trial, even though no charges have been, or are likely to be filed.
Sometimes the program is handled internally by the law enforcement agency itself, which often generates a substantial portion of its overall budget from the check fees that it collects . In many cases, the law enforcement agency signs up with a private collection agency
Collection agency
A collection agency is a business that pursues payments of debts owed by individuals or businesses. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed....
. The private company essentially pays the law enforcement agency a small portion of the fees it collects
Kickback
Kickback may refer to:* a form of bribery* the recoil from a firearm* Kickback , when the force on the saw blade throws it back towards the user* The sports section of the long defunct Channel Four Daily...
in exchange for permission to send demand letters on official law enforcement agency letterhead and to threaten to prosecute check writers who do not pay up to $200 in fees, plus the check itself. This is when, in most instances, there was no criminal case to dismiss, and no law enforcement official had reviewed the check writer's file to determine if there was evidence of a crime .
Lawsuits against BCRPs
A number of lawsuits have been filed challenging the legality of these programs.On December 13, 2010, a California jury returned a verdict in favor of a corporation and two individually named defendants on a claim for $30 million in actual damages under the Federal Fair Debt Collection Practices Act. The defendants, who were sued in a 670,000-person class action brought in the United States District Court for the Northern District of California, were held not liable for any actual damages, though the Court tentatively awarded each named member of the class the sum of $1 dollar in nominal damages.
The case was brought by class members who had been participants or offered a chance to participate in California's Bad Check Diversion Program against defendants who contracted with several California District Attorneys to administer the program. The plaintiffs claimed they were entitled to return of fees they paid into the program to avoid prosecution, asserting that the notice letters mailed by the defendants violated Federal fair debt collection standards because they contained a threat of prosecution of all who did not pay the fees.
In closing arguments, counsel for the plaintiff class contended that trial made legal history and that it was the "largest FDCPA class action ever tried."
In a lead up to the trial, on June 3, 2010, a California federal court ruled that defendants violated federal and state law by operating a bad check restitution program in which they sent letters on district attorney letterhead, threatened proseuction and charged fees for a "diversion class." (del Campo v Mealing, 5:01-cv-21151, (USDC ND Cal.) but the judge in the case, James Ware, reversed this ruling and ordered a new trial, stating he learned new information during the trial that conflicted with his earlier ruling against them.
In most states, criminal intent is determined if the victim of the bad check attempts to notify the writer of the bounced check and the check writer does not make good on it within a specified period of time. Writing a check on an closed account establishes intent to defraud.
In several lawsuits in federal court in Michigan, California, Indiana, Florida, Iowa and other states, consumers have charged that the program is rife with illegal and unfair collection practices, and is an abuse of government power. In a lawsuit in Iowa, Liles v. American Correcive Counseling, Inc., the check diversion company agreed to refund money to class members. In a lawsuit in Michigan, Gradisher v. Check Enforcement Unit, Inc., 210 F. Supp. 2d 907 (W.D. Mich. 2002), the court ruled that the collection practices violated the federal Fair Debt Collection Practices Act
Fair Debt Collection Practices Act
The Fair Debt Collection Practices Act , et seq., is a United States statute added in 1978 as Title VIII of the Consumer Credit Protection Act...
. On May 2, 2008, in Schwarm v. Craighead, Civ. No. 05-1304 (E.D.Cal), the United States District Court ruled that the bad check restitution program that was operated in two dozen California counties violated the Fair Debt Collection Practices Act in a variety of ways, including making false threats of prosecution, and charging illegal fees. A lawsuit brought in Indiana was dismissed.
External links
- National Check Fraud Center - explains the laws pertaining to bad checks in all 50 states.
- Consumer Information About Bad Check Restitution Programs - explains how bad check restitution programs operated by private companies operate.