Check Bounced? Be Scared

Lois Artz of Petaluma, Calif., is a 70-year-old retired bank employee who wrote a bad check. Artz said she intended to deposit another check to cover the $28 check that bounced, but she forgot.

Simona Pickett, a 35-year-old federal government worker who lives in Middle River, Md., also bounced a check. Pickett wrote a $21.66 check to a local supermarket. That check was returned for insufficient funds.

No question these two women were wrong. You should never write a check when you do not have the funds in your checking account. Certainly Artz, the former bank employee, should have known better.

For their errors, both consumers were referred to a check-restitution program operated by prosecutors in their local areas. They were sent letters telling them they owed fees several times the amount of the bounced check. They were informed they would have to take a class intended to teach them financial responsibility.

And they were told that if they didn't pay up and go to class, they would be prosecuted.

A number of state and local prosecutors across the country are using "check-diversion" companies to operate their restitution programs in an effort to reduce the number of bounced checks. Check-diversion companies are private, for-profit debt collectors that contract with prosecutors to collect returned checks. Prosecutors using check-diversion companies argue the programs work by returning millions to merchants and decreasing court cases.

It is certainly not unreasonable for people who write bad checks to pay for their financial mismanagement.

But Public Citizen and the National Consumer Law Center are complaining to the media and to Congress that some check-diversion companies -- most notably, California-based American Corrective Counseling Services Inc. (ACCS) -- are engaging in abusive and deceptive collection practices. The groups claim that consumers such as Artz and Pickett are not given a fair chance to make good on their bounced checks before they get threatening letters and are assessed excessively high fees.

Artz, the former bank employee, said she forgot to deposit the check because she's dealing with a daughter who has a terminal illness.

"I was treated like a criminal," she said during a teleconference organized by the consumer groups. "I was terrified of going to jail."

Pickett was changing banks and, because of a mix-up, her new account didn't have the overdraft protection she wanted.

"By no means am I saying I shouldn't pay what I owe, but they shouldn't be allowed to terrify me either," Pickett said in an interview.