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Crackdown on Debt Collection Companies in California

May 9, 2006

The consumer rights groups, Public Citizen and the National Consumer Law Center (“Law Center” hereafter), have asked Congress not to pass legislation allowing debt collection agencies to be protected from the strict federal consumer protection laws. These agencies have been often posing as state prosecutors and are overcharging consumers for passing bad checks. Public Citizen has also filed a class action lawsuit against some of the debt collection companies in California and Indiana.

These debt collection companies, sometimes referred to as “check diversion” companies are privately run collection agencies working as a business for profit. Under some California debt law these companies are allowed to pose, through letters, as a local district attorney’s office. The companies send out letters requesting the debt to be repaid, or the bad check to be repaid, along with a bill for exorbitant fees that the Law Center says are unnecessary and unwarranted. The letters often threaten the debtor with severe things such as jail time or other criminal charges if they do not pay the required amount. The income from these bills is split between these companies and the prosecutors’ offices.

The Law Center’s lawsuit alleges that most of the targeted consumers are not criminals and nor did they illegally bounce their checks. In California, proof of intent to fail to pay must be proven in a bounced check charge before criminal penalties are given. Many of the people targeted by debt collection companies which the Law Center is investigating included people who bounced checks of less than $10. The fees that the company seeks are often in the hundreds of dollars and include fees for debt classes, administrative fees and other bogus charges. Many times the debt classes were not held or the person was told after paying that they did not have to attend them.

The Law Center lawsuit alleges that the company American Corrective Counseling Services, Inc. (“ACCS” hereafter) of California is one of the biggest offenders of this scheme to defraud consumers. ACCS has offices and operates throughout California and some 17 other states in the country. ACCS is one of the largest debt collection companies in the US and, according to the Law Center’s lawsuit, is alleged to be one of the biggest offenders in sending consumers the false prosecutorial letters.

The debt collection companies sued in the Law Center’s lawsuit are being sued under federal provisions which prohibit companies from operating under false pretences. If you or someone you love is unable to pay debts, or is being harassed by debt collection companies, filing bankruptcy may be the best way to address those financial problems, as individuals who file bankruptcy can seek to discharge (make permanently unenforceable against the individual) credit cards debts, medical debts, and many other kinds of unsecured debts. Contact our law firm immediately for a free initial consultation regarding whether you or your loved one filing bankruptcy may be appropriate to address financial problems, including stopping collection agencies from harassing you or your loved one.

The Bankruptcy Law Firm represents small businesses and individuals in bankruptcy matters in all divisions of the United States Bankruptcy Court for the Central District of California including the counties of Los Angeles, Orange, Ventura, San Bernardino, Riverside, Santa Barbara, and South San Luis Obispo. Please call or contact our Los Angeles bankruptcy law firm for a free initial consultation regarding your financial situation. The Bankruptcy Law Firm, PC offers competent bankruptcy legal representation at fair prices.

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