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March 30, 2015
CFPB imposes $50,000 penalty against debt collector
CFPB on Monday proposed legal action that would require a debt collection company and its CEO pay a civil money penalty of $50,000 for the deceptive threats and intimidation tactics used to coerce consumers into paying debts for bounced checks.
CFPB alleges that the California-based company, National Corrective Group, told consumers that they must enroll in a financial education program, which cost an average of $200, to avoid facing criminal charges. The proposed order by CFPB, which includes ending illegal activities, requiring new consumer disclosures, strengthening oversight of the bounced check program and paying the $50,000 penalty, must be approved by a federal district court.
CFPB's order also includes several related entities that purchased contracts and assets of National Corrective Group, including Victim Services Inc. and American Justice Solutions Inc. CFPB noted that these companies, combined, operate one of the largest bad-check diversion programs in the nation.
Consumers accused of writing bad checks are sometimes offered diversion programs to avoid criminal prosecution, but CFPB notes it is illegal for a company operating such a program to contact a consumer until a prosecutor's office has reviewed the consumer's case to ensure their eligibility.
CFPB alleges that National Corrective Group deceived consumers by sending them notices on prosecutors' letterheads, creating the impression that the consumers might be prosecuted for writing bad checks. These letters went out ahead of a prosecutor's investigation. The company also told consumers they must repay the bounced check debts and enroll in a financial education program.
CFPB alleges that the California-based company, National Corrective Group, told consumers that they must enroll in a financial education program, which cost an average of $200, to avoid facing criminal charges. The proposed order by CFPB, which includes ending illegal activities, requiring new consumer disclosures, strengthening oversight of the bounced check program and paying the $50,000 penalty, must be approved by a federal district court.
CFPB's order also includes several related entities that purchased contracts and assets of National Corrective Group, including Victim Services Inc. and American Justice Solutions Inc. CFPB noted that these companies, combined, operate one of the largest bad-check diversion programs in the nation.
Consumers accused of writing bad checks are sometimes offered diversion programs to avoid criminal prosecution, but CFPB notes it is illegal for a company operating such a program to contact a consumer until a prosecutor's office has reviewed the consumer's case to ensure their eligibility.
CFPB alleges that National Corrective Group deceived consumers by sending them notices on prosecutors' letterheads, creating the impression that the consumers might be prosecuted for writing bad checks. These letters went out ahead of a prosecutor's investigation. The company also told consumers they must repay the bounced check debts and enroll in a financial education program.
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