A national debt-collection company is violating federal law by “renting” the letterhead and seals of district attorneys to falsely convey to debtors that criminal prosecution awaits if they don’t pay up, according to a proposed federal class action filed in Washington state.

Grant County, Wash., plaintiff Wodena Cavnar and two others in the Seattle area sued debt collector BounceBack Inc., on July 18. They alleged the company violated the Fair Debt Collection Practices Act and Consumer Protection Act by using the official-looking forms to scare the recipients into paying unpaid bills plus $140 or more for a “financial education” class, plus assorted fees.

It is legal for prosecutors in some Washington counties, and in an estimated 300 other jurisdiction around the country, of providing debt collectors with letterhead and seals in exchange for a portion of the funds collected. The practice is seen as a smart use of judicial resources, freeing district attorneys from low-priority and small-value bad-check prosecutions, helping merchants recover what’s owed them and providing some revenue for the county, according to the complaint.

But Cavnar v. BounceBack, filed in U.S. District Court for the Eastern District of Washington, contends that Missouri-based BounceBack, one of the nation’s largest bill collectors, uses the items to perpetrate an implied threat that the D.A. will press charges unless a debt is paid. In fact, the complaint says, prosecutors do not review the cases for probable cause of criminal intent before the letters are sent, or weigh whether charges are appropriate, or resolve cases if debtors complete the course.

The plaintiffs allege that BounceBack also violates the fair debt law by not disclosing that the letter is from a debt collector, not law enforcement, and does not inform those with overdue bills that they are not lawfully obligated to pay the fees imposed by BounceBack.

As a result, many debtors—including named plaintiff Rosaline Terrill—have paid as much as five times the amount of their dishonored check in response to the letter. A mother of three special-needs children, Terrill was dunned when her $41.19 check to Goodwill Inc. for clothes for her kids bounced; she wound up paying $260.94 to settle the debt.

The plaintiffs also allege that BounceBack is violating both state and federal laws that expressly prohibit a non-lawyer collection company from operating in the name of a law office, even if the lawyer agrees to the use.

The plaintiffs’ attorneys are Erika Nusser, Beth Terrell and Nicholas Power; and Deepak Gupta of Gupta Beck.

Lisa Hoffman is a contributor to law.com.