Banking and Finance Law Daily 42 State AGs settle with debt buyer Encore Capital
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Wednesday, December 5, 2018

42 State AGs settle with debt buyer Encore Capital

By Colleen M. Svelnis, J.D.

Attorneys general from 42 states, along with the District of Columbia, have announced a multistate settlement with debt buyers Encore Capital Group, Inc., and its subsidiaries Midland Credit Management, Inc., and Midland Funding, LLC, following a multistate investigation into the group’s collection and litigation practices. Encore Capital is one of the nation’s largest debt buyers.

The states investigated allegations that Midland signed and filed affidavits in state courts in large volumes without verifying the information printed in them, a practice referred to as robo-signing. Illinois Attorney General Lisa Madigan called Midland’s robo-signing of inaccurate court documents to collect consumer debt illegal and stated that the settlement "will provide financial relief to consumers who were victims of this company’s unfair and deceptive debt collection practices." According to Georgia Attorney General Chris Carr, this practice of robo-signing was "unjust and hurt consumers."

Iowa Attorney General Tom Miller released a statement that "We’ve been investigating Midland’s behavior for years and working with the company to correct it. We’re confident this settlement will reform the company’s practices and protect consumers." Florida Attorney General Pam Bondi stated that the settlement "establishes further safeguards to protect future borrowers from bad collection practices, in addition to providing judgment relief to existing debtors.

Debt buying. Debt buying involves buying and selling overdue debts from creditors and other account owners. Debt buyers purchase debt for much less than the full balance, and then seek to recover the full balance from consumers through collection attempts. Debt buyers also take consumers to court to collect the debts, often resulting in default judgments, which can affect consumer’s credit.

Settlement includes restitution. The settlement agreement, along with the assurance of voluntary compliance, requires Midland to reform its affidavit signing and litigation practices. Midland must verify the information in affidavits and present accurate documents in court proceedings. When Midland files a lawsuit, it must have account documents about the debt before they file the case, including the amount of the debt, proof of an agreement and an explanation of why any additional fees are justified.

Under the settlement Midland must pay $6,000,000 to the states within 30 days. In addition, it must set aside $25,000 per state for consumer restitution, including:

  • consumers who made a payment to Midland on a debt that was not actually owed by the consumer, and which was not refunded;
  • consumers who made a payment to Midland in excess of that which was owed by the consumer, and which was not refunded; or
  • consumers who made a payment to Midland after Midland submitted an affidavit in a collections lawsuit and the amounts allegedly owed by the consumer as reflected in the affidavit did not accurately reflect Midland’s account records of the consumer’s debt at the time of execution of the affidavit.

The settlement agreement also requires Midland to provide a credit to the outstanding balance of the judgment up to $1,850 to each consumer where: the judgment was taken in a court in a participating state; the consumer disputed the debt with Midland; Midland filed a collection lawsuit against the consumer after the consumer disputed the debt and a law firm requested an affidavit from Midland to support the lawsuit between Jan. 1, 2003, and Sept. 14, 2009; and the consumer never made a payment to Midland in connection with the debt.

Midland will notify impacted consumers by mail of the balance reduction and that no further action is necessary from the consumer.

Companies: Encore Capital Group Inc.; Midland Credit Management, Inc.; Midland Funding, LLC

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