CFPB takes action against ‘bad check’ debt collector

The Consumer Financial Protection Bureau is taking legal action against a national debt collection company that’s accused of threatening borrowers with criminal charges and jail time in order to collect on bounced checks.

The CFPB said National Corrective Group faces a $50,000 fine if a federal district court approves the proposed order.

The agency alleges that the California-based corporation sent customers notices on prosecutors’ letterhead creating the false impression that the customer might be prosecuted for writing a bad check. The letters were mailed before any district attorney had determined prosecution was likely. The company also told consumers they could avoid prosecution by taking the company’s $2000 financial education classes, which often ended up costing more than the amount of the check that bounced.  

In addition to National Corrective Group, the CFPB’s proposed order names Victim Services Inc. and American Justice Solutions Inc., which purchased all of the contracts and assets of National Corrective Group, and took over its operation during the course of the CFPB’s investigation.

Mats Jonsson, National Corrective Group’s CEO, is the senior company executive in charge of the daily operations of its bad check diversion programs and continues to operate Victim Services Inc. and American Justice Solutions, Inc., which operate one of the largest bad check diversion programs in the U.S.

The CFPB said the law prohibits companies that operate bad check diversion programs from contacting a consumer about the program until a prosecutor’s office has reviewed the case and determined the consumer is eligible.

The law also requires these companies to inform consumers of certain rights, including their right to dispute allegations of bad check violations.