WASHINGTON, D. C. – Attorney General Karl A. Racine announced today that the District of Columbia has joined 42 states in a $6 million settlement with Encore Capital Group, Inc. and its subsidiaries, Midland Credit Management, Inc. and Midland Funding, LLC (Midland) for using illegal tactics to collect unverified debts. The settlement resolves a multistate investigation into the debt-buying company’s collection and litigation practices, including claims that Midland “robo-signed” and filed affidavits containing unverified and potentially inaccurate information to support debt-collection lawsuits against consumers. The settlement provides debt relief to hundreds of consumers in the District and requires Midland to reform its practices.
“Midland illegally attempted to collect debts it had not verified through robo-signing and other illegal practices,” said AG Racine. “Robo-signing especially hurts lower-income consumers who may not have the means to fight a debt collector in court. Today’s settlement helps ensure Midland won’t abuse consumers again and serves as a warning to other unscrupulous companies.”
The San Diego-based Midland is one of the nation’s largest debt-buying companies. Debt buying involves buying and selling overdue debts from creditors and other account owners. Although debt is often purchased for pennies on the dollar, debt buyers seek to recover the full balance from consumers through collection attempts by phone and mail. Debt buyers, including Midland, also take consumers to court to collect the debts they purchase. However, people are often unable to afford attorneys to defend the allegations and cases result in default judgments, hurting consumers’ credit and putting people in jeopardy of having their wages garnished.
The multistate investigation into Midland uncovered several practices that violated federal and state laws, including the federal Fair Debt Collection Practices Act and Fair Credit Reporting Act. Specifically, Midland harmed consumers between 2003 and 2009 by:
- Failing to verify debt information: The states alleged Midland failed to verify information in affidavits they filed in debt-collection suits, sometimes leading to consumers who were unaware of debts that Midland had purchased being subjected to legal proceedings. Federal and state laws require debt purchasers to carefully verify the information in affidavits.
- Failing to properly document debts: The states alleged that Midland would file lawsuits to collect debts without properly documenting those debts. The law requires debt collectors to document certain information before filing suit to collect debt, including: the amount a debtor owes, proof that the debtor had entered into an agreement to incur the debt, and an explanation of why any additional fees included in the collection amount are justified.
The settlement offers protections to consumers from whom Midland is collecting, even if those consumers have not been sued. To ensure harmed consumers are provided relief and to ensure consumers are no longer subject to these illegal practices, Midland has committed to:
- Provide debt relief and compensation for harmed District consumers: As part of the settlement, approximately 422 District consumers will receive some form of debt relief in the total amount of $577,783 from Midland. Midland will notify impacted consumers by mail of the balance reduction and consumers do not need to take further action. OAG will also contact harmed consumers and provide them with information about their legal options. In addition, Midland will set aside $25,000 per state to compensate consumers who may have paid Midland money that the consumer did not owe or for whose case Midland’s affidavit was inconsistent with information in its records.
- Provide accurate information about valid debts: If a consumer disputes a debt Midland is collecting, the settlement requires Midland to review original account documents before it continues its collection efforts and provide these substantiating documents to the consumer at no charge.
- Pay a $6 million penalty: Midland will make a payment to the states of $6 million.
- Stop debt-reselling for two years: The agreement prohibits Midland from reselling any debts to other parties for two years.
- Properly oversee and train its agents: The settlement requires Midland to provide oversight to ensure its employees and the law firms it uses are properly documenting debts before filing suit.
Joining AG Racine in today’s settlement were attorneys general from Alaska, Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin, and Wyoming.
A copy of the settlement agreement is available at: http://oag.dc.gov/sites/default/files/2018-12/Multistate-Midland-AVC.pdf
Online Debt Collection Resources for District Residents
Consumers who want to better understand how to deal with debt can visit our Consumer Protection page, and access resources on debt collection and consumer credit.