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California Judge Denies Private Debt Collector’s Bid to Force Arbitration

August 02, 2016

Private Debt Collection Company Renting Out the District Attorney’s Name Can’t Force Consumers to Arbitrate Claims

Terrell Marshall Law Group has filed suit on behalf of California consumers against the for-profit debt collection company Victim Services, Inc. (also known as CorrectiveSolutions, and formerly known as National Corrective Group, Inc.) for violating the Fair Debt Collection Practices Act (“FDCPA”) and the California Unfair Competition Law. Plaintiffs Kevin Breazeale, Karen Solberg, Kevin Hiep Vu, Nancy Morin, and Narisha Bonakdar received letters stating that they were “accused of violating” the California Penal Code and threatening them with criminal prosecution for debts arising from unpaid checks for small retail purchases. These notices, which are attached to the complaint, bore the seal and letterhead of a county district attorney, which was rented out to Defendants in exchange for a cut of the collection fees. Plaintiff Bonakdar and many members of the proposed class paid not only the check amount, but also hundreds of dollars in Defendants’ fees.

On July 27, 2016, U.S. District Judge Vince Chhabria of San Francisco denied the private debt collector’s bid to force consumers who paid illegal fees to the Defendants out of court and into private arbitration. The Court explained that “if the government uses private agents in the exercise of its law enforcement power, California public policy requires that the conduct of those agents be subject to judicial review.” A San Francisco Chronicle article discusses the importance of the decision, including its potential impact in cases challenging private prisons.

Discovery in the case is still ongoing and Plaintiffs will move for class certification once that process is complete. The Plaintiffs are represented by Terrell Marshall Law Group PLLC, Law Office of Paul Arons, Gupta Wessler PLLC, and Ram, Olson, Cereghino & Kopczynski.