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Feds Allege Deceptive Threats at National Corrective Group

March 30, 2015
Personal Finance
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A company specializing in collecting on bounced checks pretended to be law enforcement, threatening people with criminal prosecution and jail time if they didn’t pay up, according to a federal agency.

National Corrective Group also falsely made consumers believe they needed to sign up for an expensive financial-education program to avoid criminal charges,  the Consumer Financial Protection Bureau says.

“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 prosecution,” CFPB Director Richard Cordray said Monday in a news release. “Today we are taking action to put a stop to these illegal debt collection practices.”

The bureau is petitioning a federal district court judge to make the California company stop the deceptive practices and pay a $50,000 civil penalty.

The order also names National Corrective Group CEO Mats Jonsson and two other entities that bought out its operations during prosecution, and which Jonsson also heads up.

Together, the three entities represent one of the largest bad-check diversion programs in the United States, according to the CFPB.

Allegations of misleading communication

The bureau says National Corrective sent notices to consumers on the letterhead of prosecutors’ offices and created the false impression they may be prosecuted for writing bad checks. The letters went to the consumers before any district attorney had determined prosecution was likely, the bureau said.

They were allegedly told they had to pay for the bounced checks and sign up for an education class that typically cost around $200. That was often “several times the amount of the alleged bad check debt,” the bureau said.

Under terms proposed by the bureau, entities affiliated with National Corrective Group would have to end deceptive communication, including threats of prison time. They would be prohibited from contacting any consumers unless under the supervision of a district attorney’s office or other legal entity and pay the $50,000 fine.

“The poor financial condition of the companies and Jonsson make them unable to pay a greater sum,” the bureau wrote.

Doug Gross is a staff writer covering personal finance for NerdWallet. Follow him on Twitter @doug_gross and on Google+.

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