Tougher Collection Rules Ahead for Check Bouncers Collection agencies are using more aggressive tactics to pursue people who bounce checks. Now the federal government is considering whether to give these groups greater freedom from laws regulating treatment of consumers. Noah Adams talks to Day to Day personal finance contributor Michelle Singletary about the tough collection policies being applied to check bouncers, and how new legislation could affect consumers.
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Tougher Collection Rules Ahead for Check Bouncers

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Tougher Collection Rules Ahead for Check Bouncers

Tougher Collection Rules Ahead for Check Bouncers

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Bouncing a check has always been inconvenient and usually very embarrassing. And now some check bouncers are worried that a single bad check could land them in jail. That's the threat some collection agencies are using to get people to pay up. The problem is, it's often a lie. And joining me now to talk about this is DAY TO DAY's own financial guru, Michelle Singletary. Welcome, Michelle.


Thank you.

ADAMS: I have written a check for insufficient funds. I gather you have sometime way back?

SINGLETARY: Way, way back, and it was because my paycheck, which was automatically put into my checking account, didn't come through because of some glitch. But I've never written a check where I knowingly did not have the money in my checking account.

ADAMS: Well, that's good. And now, what about the debt collectors have this new method to go after the check bouncers, and it's pretty drastic?

SINGLETARY: A number of state and local prosecutors across the country are using what are called check diversion companies to operate restitution programs in an effort to reduce the number of bounced checks. Lots of folks are bouncing checks. Oftentimes, you know, they know they're going to deposit a check, haven't quite gotten to the bank, and they write a check. Now, these check diversion companies, they're private, for profit, debt collectors that are hired by the prosecutors to go after these folks. And in the letters, they often threaten jail if these people don't pay up and take a class on financial responsibility.

ADAMS: Now, these are court prosecutors you're talking about?

SINGLETARY: That's right. State and local prosecutors. Because a lot of merchants are saying, listen, we've got all these bad checks, can you help us? And clearly there are folks out there who are intending to defraud merchants, so these prosecutors created this program to collect on these bounced checks.

ADAMS: That's pretty powerful stuff coming in the mail to you, I bet?

SINGLETARY: It is, and it has scared a lot of folks. And these consumers are alleging that these check diversion companies are using hard taxes, overcharging them - some of them having fees of say, $200 or more on a check of as little as $3.

ADAMS: But I mentioned that it's often a lie. You're saying they're saying they're going to do something they really would not do in actual practice?

SINGLETARY: Well, that's what the consumer groups and consumers are saying, that, you know, eventually, these folks would not be put in jail, that it was an accident, that they didn't intend to defraud the merchant.

ADAMS: You have written about the fair debt collection practices act. How does that fit in with this issue?

SINGLETARY: Well, a major check diversion company based in California, American Corrective Counseling Services, and the National District Attorney's Association is pushing Congress to exempt these debt collectors from the Fair Collection Debt Practices Act. Now, what this act does is basically say you can't harass people, you can't lie to people, you can't be abusive, and guess what? You can't threaten them with jail if it's not a real possibility. But the prosecutors are saying, hey, these are people acting on our behalf and they should be exempt. And consumer groups are saying, oh, hold up. There ought to be some oversight on these companies that are not state government workers.

ADAMS: It is one thing to get sort of an angry letter, but another to have somebody say we're going to put you in jail for a bad check.

SINGLETARY: Well, exactly right. And there are a number of consumer advocate groups - Public Citizen, the National Consumer Law Center - that says that these threats are not legitimate, that many of those people who are being caught up in these programs would not be sent to jail.

ADAMS: Michelle Singletary writes the syndicated column, The Color of Money. She's our regular contributor on matters of personal finance. Thank you, Michelle.

SINGLETARY: You're welcome.

ADAMS: If you have personal finance questions you'd like to ask Michelle, go to, click on the contact us button, and please put Michelle right there in the subject line.

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