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editorial

New limits are required on out-of-control debt collectors

District attorneys’ offices have more pressing matters than chasing down people who bounce checks at supermarkets and other retail establishments. It’s understandable, even advisable, that prosecutors would contract out the administrative work to private collection agencies. But no one is served when the DAs turn over their prosecutorial discretion to private entities in the process.

Last month, a Globe article revealed how two unlicensed debt collection agencies — Corrective Solutions and BounceBack — not only dunned writers of bad checks but also determined who had crossed the threshold from sloppy record keeping into criminality. The state Division of Banks, which regulates debt collection agencies, was unaware of the practices until contacted by a reporter. Subsequently, the district attorneys in six counties, including Suffolk, Middlesex, and Norfolk, terminated or suspended their relationships with the unlicensed debt collection agencies.

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The Massachusetts District Attorneys Association has crafted legislation — similar to a federal model — that would provide exemptions from regulations for debt collectors working on behalf of district attorneys. But it’s a dangerous road. The state Division of Banks and consumer advocates should scour the bill for any loopholes that would allow unfair practices.

The debt collectors in question have resorted to numerous subterfuges in the past, including sending out demand letters on stationery that appears to have the official imprimatur of the district attorneys. The collectors also steer bad check writers into expensive company-run classes on financial accountability. As a result, the companies’ fees and commissions exceeded 100 percent in some cases, vastly higher than the debt collection industry average.

The debt collection companies provide considerable convenience for the DAs. The writers of bad checks are given a chance to avoid larceny charges by cooperating with the collectors. And shop owners can avoid multiple court appearances when trying to recover losses. These are all good goals. But any new legislation should be exceedingly clear that DAs will screen every case before turning it over to collectors. The Division of Banks, meanwhile, should insist that the debt collection companies be licensed in Massachusetts. And, if necessary, the bank commissioner should step in and apply the type of caps on commissions that are currently imposed on interest on so-called payday loans by check-cashing companies.

Bouncing checks is no joke. Merchants deserve to be paid, and debt collectors deserve reasonable compensation for their efforts. But the old model was too prone to abuse and often looked more like a larcenous act than a solution to one.

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