Check Collection Firm Reaches $3.2 million Settlement

A federal judge in California last week approved a settlement between a check collection firm and a class of plaintiffs that calls for the company to pay some $3.2 million to the class and its legal representation.

U.S. District Judge Jeffrey White approved the settlement between Corrective Solutions (formerly National Corrective Group Inc.) and a class of about 500,000 consumers over the company’s tactics in collecting bad checks on behalf of district attorneys through bad check diversion programs.

Diversion programs have been the focus of media attention lately, with two high-profile investigations from The New York Times and Boston Globe. Consumer advocates argue that practices used by collection agencies on behalf of DAs hurt consumers. As stated in the suit, they allege that Corrective Services used intentionally misleading language in their communications, leading consumers to believe they may be arrested.

District attorneys and small business owners, meanwhile, love the programs as they return lost money to merchants and provide an outsourcing solution to burdened DA offices.

The approved settlement is the second in the long-running class action suit. A deal had been reached last year, but two of the plaintiffs objected, sending the parties back to negotiations.

As noted in the settlement agreement, Corrective Solutions is the successor company to American Corrective Counseling Services, Inc. (ACCS). Embroiled in litigation, including another large settlement, ACCS filed for bankruptcy protection in 2009.

For its part, Corrective Services deny many of the allegations and do not admit to wrongdoing in the settlement. The company, in fact, claims that it is not a debt collection agency at all and that the language it used in collection letters was not false or misleading.

A hearing for final approval is set for Jan. 31, 2014.