Bad check diversion program collection letters may violate federal consumer protection laws.

• Author: Cohen, Kay Chopard

LOCAL AND STATE PROSECUTORS' OFFICES often offer bad check diversion programs to people accused of writing bad checks as a way for the individual to avoid criminal prosecution. These programs typically require alleged bad check offenders to complete a financial accountability class and pay full restitution to the victim merchant as well as an administrative and program fee. Debt collectors running these programs at the direction, supervision, and control of the district attorney have recently come under closer scrutiny by the federal Consumer Financial Protection Bureau (CFPB). Prosecutors using these programs need to be cognizant of the law to ensure compliance with federal legal requirements.

The Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from engaging in unfair, deceptive, abusive, and other unlawful conduct in collecting consumer debts. In 2006, Congress amended the FDCPA to exempt debt collectors that operate bad check diversion programs from certain FDCPA requirements under certain conditions. (1) According to the law, to enjoy the exception from the FDCPA's general requirements, the private entity must operate the program "under the direction, supervision, and control" of the district attorney and is not permitted to exercise independent prosecutorial discretion or contact consumers until a district attorney has determined that they are appropriate for the diversion program. The private entity must also comply with state penal laws and include certain clear and conspicuous statements in its initial written communication with consumers. Because debt collectors that operate these programs do not always operate within these parameters and do not always conduct themselves in accordance with the FDCPA, these programs have recently come under scrutiny by the American Bar Association (ABA) and the CFPB.

The ABA Standing Committee on Ethics and Professional Responsibility recently issued a formal ethics opinion on the subject, stating that "[t]ypically, no lawyer in the prosecutors office reviews the case file to determine whether a crime has been committed and prosecution is warranted or reviews the letter to ensure it complies with the Rules of Professional Conduct prior to the mailing." (2) The ABA found that such collection letters "misuse the criminal justice system by deploying the apparent authority of a prosecutor" and "carry with them the implication that the prosecutor or associates in the prosecutors...