- Associated Press - Monday, April 6, 2015

SAN FRANCISCO (AP) - A California debt collection company accused of trying to intimidate debtors has reached a settlement with federal regulators that requires it to stop using district attorneys’ letterheads and threatening criminal punishment while seeking payments, a newspaper reported.

National Corrective Group has to cease the practices as part of a settlement announced last week with the federal Consumer Financial Protection Bureau, the San Francisco Chronicle reported Monday (https://bit.ly/1GhuMv8 ). The settlement was later approved by a court.

“National Corrective Group masqueraded as prosecutors and used deceptive tactics to intimidate consumers into paying hundreds of dollars in extra fees to avoid potential criminal prosecutions,” bureau director Richard Cordray said in a statement.

National Corrective Group Chief Operating Officer Thomas Jonsson denied making any false threats.

State law allows district attorneys to enlist private companies to run programs that allow people who deliberately and fraudulently write bad checks to avoid prosecution, according to the Chronicle.

National Corrective Group runs CorrectiveSolutions in San Clemente, California.

A private lawsuit filed against CorrectiveSolutions in December accused the company of deceptive practices in counties across the state where prosecutors allegedly agreed to let the company use the district attorney’s seal and letterhead in exchange for a small percentage of the fees the company collects.

The lawsuit, filed on behalf of three California residents who received collection notices, said CorrectiveSolutions’ letters falsely claimed the authority of a district attorney and threatened criminal prosecution even though no prosecutor had reviewed the evidence and the person was unlikely to be charged with a crime.

Jonsson said the firm’s contacts with debtors were approved by district attorneys’ offices.

The attorney behind the lawsuit, Peter Arons, said the settlement with federal regulators takes care of most of the complaints in the lawsuit, but he is still seeking millions of dollars in fees that were already collected.

San Mateo County District Attorney Steve Wagstaffe said his office will no longer allow CorrectiveSolutions to use its letterhead, but the changes required by federal regulators would not limit the program’s effectiveness.

“This is an educational program. People can avoid conviction if they take classes and pay restitution,” he told the Chronicle.

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Information from: San Francisco Chronicle, https://www.sfgate.com

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