U.S. District Judge Jeffrey White has approved a preliminary $3.2 million settlement for a class-action lawsuit that accused private debt collector Corrective Solutions of posing as district attorneys to extort more than $20 million in fees from debtors. About 500,000 people say they were threatened and intimidated by the firm, contrary to anti-racketeering law.
Consumers in California and Pennsylvania filed federal lawsuits in 2010 claiming that Corrective Solutions ran a "fraudulent and extortionate check-recovery enterprise" between 2004 and 2009, contracting with more than two dozen district attorneys to collect bounced checks. Consumers said they received letters on fake district attorney letterheads threatening them with prosecution if they did not pay fees of more than $200 per check. The letters allegedly deceived recipients into believing that they were part of an official, outsourced "bad check diversion program."
Washington, D.C., attorney Paul Arons confirmed that National Corrective Group Inc. filed for Chapter 11 bankruptcy in 2009 to avoid four class actions involving more than 1 million consumers, only to reinvent itself as the firm Corrective Solutions. "I think it is morally reprehensible for elected public officials to go into business with debt collectors to do what other debt collectors can't do, and get a piece of the action," Arons said in an interview. "They also invent fees that have no basis in law. On top of that, from a technically ethical point of view, the prosecutors are all lawyers and they are allowing non-lawyers to use their letterhead." He noted that this could be considered aiding and abetting.