Chesapeake’s Hemphill-Martin is still bitter over her experience.
She paid $16 for a lamp at the CHKD thrift store on Battlefield Boulevard in Chesapeake in 2003. It was supposed to operate in response to touch, but she said the only way to turn it off was to unplug it.
When she tried to return it to the store, she was told that all sales were final. She tried to stop payment on the check she had written for the lamp, but it had bounced.
Hemphill-Martin, 53 and disabled with a respiratory condition since 1995, said CHKD tried to garnishee her bank account for $159.13 to cover the check. After a legal skirmish that lasted several months, a judge disallowed the collection, ruling that her disability income was exempt from garnishment.
“I can barely make ends meet and they’re coming after me for all this money,” Hemphill-Martin said. “I understand that when you write a bad check, you should have to make things right. But there are reasonable approaches and unreasonable approaches. This was unreasonable.”
Back in 1996, Nancy E. Edwards spent $29.41 on clothes for her three children, one of whom had a heart defect that was corrected by surgery at CHKD by a doctor she described as “a simply wonderful cardiologist.” Her experience with the hospital’s thrift store did not have such a heartwarming outcome.
Edwards said she was trying to squeak by on a clerk-typist’s salary and having trouble balancing her checkbook. The thrift store check bounced, turning into a $198.93 debt, which she said she eventually paid off. She decried the aggressive debt collection as “predatory, like that guy who keeps selling the same cars over and over after they’v e been repo’ed.”
Edwards now has a master’s degree in public administration and works as procurement coordinator for a Head Start program in Guilford County, N.C. – which, like CHKD, is a tax-exempt nonprofit organization.
“I have a little different perspective now, and I understand the due diligence needed by nonprofits,” she said. Occasionally the Head Start Guilford Child Development Program collects on a bad debt, just like SYR, but she said those cases are rare.
“And we don’t triple the fees like they do at the thrift stores,” she said of a legal practice that allows civil penalties owed by a debtor to be tripled. Those penalties helped account for the exponential increases in debts paid on bounced checks.
Norfolk’s Spears is typical of many customers who have had accounts garnisheed after bouncing checks. More than 90 percent were women, many of them Navy wives. Of the 263 checks in Virginia Beach that resulted in garnishments, dozens were written on Navy Federal Credit Union accounts.
“Sometimes my husband or I will take money out of the account and not let the other know,” said Spears, who lives in Norfolk’s working-class Estabrook neighborhood. “It certainly wasn’t intentional.”
When she got the letter from Perk, Spears said, “I tried to call, and they kept rerouting me. I wanted to take care of this, but nobody could figure who I should talk to.”
The garnishments “seem like an outrageous practice. I can think of nothing that would justify it,” said Ellis James of Norfolk, who has worked as an advocate for the poor for decades in an individual capacity and as a member of various organizations. “This drives the poor deeper into debt and deeper into the quicksand they’re already caught in.”
From Williamsburg to Virginia Beach, in eight of the 10 southeastern Virginia localities where CHKD stores operate, computers in the general district courts reveal screen after screen of judgments filed against customers by SYR Inc. and CHKD Thrift Stores – more than 2,000 separate court filings for bad checks.
No lawsuits have been filed against customers at the two stores CHKD runs in North Carolina; Perk said he is not licensed to practice law there.
Since 1995, Perk sought to garnishee a total of about $200,000 from thrift store customers in Virginia, court records show. Hospital officials estimate he collected as much as half that amount, sending monthly payments to the hospital via SYR’s accountant as the money was collected.
In all, 937 checks, written by 901 customers and averaging less than $35, led to garnishments that averaged $213 each, according to an analysis of court records.
Creditors almost never seek garnishments from customers when the check amount is $20 or less, except in cases where one customer has written multiple checks that total $20 or more, according to several debt-collection attorneys.
However, of the 522 garnishments by Perk in South Hampton Roads during the past decade, about 40 percent were for checks of $20 or less.
“I would find it surprising they would file suits for checks of $7 or less,” said William Bischoff, a lawyer who handles debt-collection cases for Farm Fresh.
The total garnishments approved by courts during the past decade, nearly $200,000, represent a tiny fraction of the $67.3 million in total sales at the CHKD stores during that time. Plus, of the 150,000 checks received from all customers last year, only 289 – about one of every 500 – were bad.
Why, then, did SYR mount a debt-collection effort Perk described as “vigorous,” taking legal action even in cases in which check amounts were as low as $2?
“You can’t take the attitude that if the item is less than $10, you don’t do anything about it,” Perk said. “It’s almost like putting up a sign saying, ‘If you shoplift less than $10, we won’t prosecute.’”
Typically, retailers do not resort to legal action until they have given the check a second chance to clear the account and they have made phone calls or sent registered or certified letters to the customer. Many then use collection agencies to try to recover the money . The process can take months.
SYR initiated legal action much more quickly. Perk usually mailed a letter warning of a lawsuit less than two weeks after the check bounced. Customers who received such a letter had 30 days to make good on the debt, “and only the ones we don’t hear from go to garnishment,” Perk said. “All they have to do is make a phone call, and many of them do.”
Several customers interviewed by The Virginian-Pilot said they were either intimidated by the letter, confused by the legal process or simply didn’t have the money to pay the suddenly inflated amount.
The case of Jacqueline W. Tappan of Norfolk shows how the debt can grow exponentially. She wrote a $4 check to a CHKD thrift on Nov. 21, 2004, court records show. It bounced. Twelve days after her purchase, she owed 10 times the check’s face value – $40.08. That included the check amount, a returned-check fee, attorney’s fees and interest.
In a Dec. 3, 2004, letter, Perk notified Tappan that if she did not pay the bill within 30 days, a lawsuit would be filed. When she failed to make the payment, her Bank of America account was garnisheed. On Dec. 28, 2005, the debt was satisfied with a payment of $120.54 – 30 times the original debt.
Tappan could not be located for comment. Her phone had been disconnected, and she had vacated the small bungalow near Northside Park where she had lived. She left no forwarding address.
Thanks to the magical CHKD name, there is little need to market the thrift store operation. SYR’s calling center, where solicitors once phoned would-be donors, has fallen silent. The sight of the boxy thrift store collection trucks – bearing the familiar logo of children’s blocks spelling out “CHKD” – may be the most effective promotion of all.
For SYR, the CHKD brand has been platinum. “People just love that damn hospital,” Sharp said.
The operation has produced a windfall for the hospital, which has seen its profits swell from $117,000 in fiscal 1989-90 to almost $2.4 million last year, according to records SYR reported to the state.
Sampson, the CHKD vice president, said a survey conducted in recent years showed that the CHKD name is the second-most widely recognized in Hampton Roads, next to Doumar’s, the landmark barbecue restaurant located a few blocks north of SYR’s headquarters at 795 Monticello Ave.
The two iconic institutions – CHKD’s thrift stores and Doumar’s – have divergent business philosophies. Taped to the front door of the drive-in restaurant is a hand-lettered sign that reads: “Cash only.”
Margaret Babonis was one of the hundreds of customers who have bounced checks at a CHKD thrift. In 2001, she paid $32.66 for an overstuffed navy blue couch and other items at the store at Virginia Beach Boulevard and Rosemont Road.
After the check bounced, the debt ballooned to $243.85. Babonis, 52, of Virginia Beach said she subsists primarily on a disability stipend as the result of a back injury.
She still patronizes the thrift stores “because that’s really the only place I can afford to shop.” She said she also continues to donate to CHKD. She recently dropped off baby clothes her granddaughter had outgrown.
While life hasn’t gotten any easier, she said, the big blue thrift store sofa with the diamond-shaped pattern came in handy recently when a furniture store repossessed her bed: She slept on it.
Bill Burke
Joanne Kimberlin
Bill Sizemore
The Virginian Pilot
April 24, 2006