The Oregon Senate has passed a bill banning private collection companies from using official government letterhead - namely that of district attorneys - to threaten bad check writers with jail.

The bill, now headed to the governor for signature, is designed to remove incentives for collection agencies to have people jailed in debt disputes.

In Washington, one key senator dropped his legislative push to impose the same prohibition on prosecuting attorneys in that state. A board formed by the Washington Supreme Court continues to investigate the practice, which takes place in at least nine counties in the state.  

Privatized check enforcement programs were launched around the country in the late 1980s, and the practice has spread to an estimated 300 prosecutors’ offices nationally. The programs began in Oregon and Washington about 13 years ago.

Retailers and other businesses in the programs agree to refer certain kinds of bad checks after trying at least once to contact the check writer.

The checks then go directly to the private contractor, which sends them to the prosecutor’s office to weigh any criminal intent and eligibility for the program before contacting the alleged bad check writers. The review is based mainly on making sure the alleged offender was contacted and did not respond.

Prosecutors say the programs are needed because businesses suffer from lots of bad checks and law enforcement agencies lack the resources to investigate and prosecute the cases. In 2009, Americans wrote $127 billion worth of bad checks, according to Federal Reserve data.

Oregon Senate Bill 525, which passed 22-5 in April, would require check enforcement companies to identify themselves as the senders of the letters, since they could not use the district attorney’s name, seal or letterhead. Also, the district attorney’s offices no longer would be allowed to receive a fee from the private companies for the collection program.

Two companies, BounceBack and Corrective Solutions, contract with district attorneys in the major counties in the states to operate so-called bad check diversion programs. The companies send out letters warning alleged bad check writers they could face a year in jail and a $6,250 fine if they don’t pay up and participate. With some exceptions, the firms pay the prosecutor’s offices a fee or percentage for successful collections.

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