CFPB Announces Enforcement Action against National Corrective Group
The Consumer Financial Protection Bureau (CFPB) has issued a proposed order to a federal district court to penalize National Corrective Group, a debt collection operation, for coercing consumers into paying debts through false threats of criminal charges. The National Corrective Group, a nationwide private corporation based in California, collects debt from bounced checks. The CFPB alleges that National Corrective Group masqueraded as state or district attorneys by utilizing prosecutors’ letterheads on mailed correspondence, intimidated consumers by threatening prosecution, and deceived debtors into enrolling in financial education classes to avoid charges. The proposed order, under the Fair Debt Collection Practices Act (FDCPA), urges the National Corrective Group to cease deceptive communication to consumers, including but not limited to discontinuing threats of imprisonment, precluding the use of duplicitous letterheads, requiring program oversight, and paying a $50,000 civil fine.
On December 1, 2014, three California consumers filed a class-action lawsuit against Victim Services, Inc., d/b/a CorrectiveSolutions and National Corrective Group, Inc d/b/a CorrectiveSolutions in federal court in California. The lawsuit challenges the practice of for-profit debt collectors renting out prosecutors’ seal — the subject of a recent ABA ethics opinion. CorrectiveSolutions operates much like any other high-volume debt collector: It solicits its business from large national retailers and other merchants, receives electronic information about unpaid checks directly from those merchants, and sends out standardized collection notices to consumers.
Despite CorrectiveSolutions’ use of the district attorney’s name and authority to coerce payments, the district attorneys exercise no meaningful control over CorrectiveSolutions’ day-to-day collection activities. CorrectiveSolutions’ threats of criminal prosecution are made without any prosecutor having actually investigated the circumstances to determine whether an unpaid check was written with criminal intent or was simply an innocent mistake. Moreover, when CorrectiveSolutions’ sends its collection letters, it cannot know whether a consumer will be prosecuted for failing to pay its steep collection fees, as the letters represent.
The plaintiffs allege that CorrectiveSolutions’ collection practices violate both state and federal law. They seek to represent a class of consumers who have received collection letters from CorrectiveSolutions, to stop CorrectiveSolutions’ deceptive debt-collection practices, and to recover the exorbitant fees consumers have paid to CorrectiveSolutions. David Lazarus reports on the case in the Los Angeles Times.