April 20, 2013

District Attorneys Back Off Private Check Collection Contracts

After reporting from several newspapers last year, district attorneys in at least one state are cancelling contracts with private debt collection agencies to pursue bad checks. The moves come as questions are raised about the practices the companies use to recover bad check fees and the right those companies have to operate in the states.

Last year, the New York Times and Boston Globe ran articles detailing the relationships between local district attorneys and ARM firms that specialize in bad check collection. The features noted that the companies often forced consumers to enroll in classes for a steep fee to clear their records.

In a follow up article published Sunday, the Boston Globe said that at least six DAs in Massachusetts had either ended or suspended their contracts with the collection agencies they hired to go after bad check writers. The Globe noted, “The district attorneys reiterated their belief that the programs were a legal and effective way to handle bad-check cases, but said they would seek legislation to explicitly authorize their use.”

While consumer advocates argue that the practices hurt consumers, district attorneys and small business owners love the programs as they return lost money to merchants and provide an outsourcing solution to burdened DA offices.

Scott Harshbarger, a former Massachusetts attorney general and Middlesex district attorney, defended the programs to the Globe. “You’re a new DA and you come in and somebody says, ‘Look, small businesses are going to be happy with you. You’re going to divert a lot of cases out of the system.’ It’s a ‘no harm done’ program,” he said.

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