Attorney General Curtis Hill announced today that he has joined 41 other states and the District of Columbia in reaching a $6 million settlement with Encore Capital Group Inc. and its subsidiaries Midland Credit Management Inc. and Midland Funding LLC, which is one of the nation’s largest debt buyers.
The settlement also provides full debt forgiveness for 126 Indiana consumers, totaling $160,552, and partial debt forgiveness to 116 Indiana consumers, totaling $214,600.
Debt buying involves buying and selling overdue debts from creditors and other account owners. 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. Cases often result in default judgments, hurting credit and putting people in jeopardy of having their wages garnished.
This settlement resolves the states’ investigation into Midland’s collection and litigation practices. Much like the conduct witnessed during the mortgage crisis, Midland is alleged to have signed and filed affidavits in state courts in large volumes without verifying the information printed in them, a practice commonly called robo-signing.
“My office takes very seriously our role in protecting consumers,” Attorney General Hill said. “Far too often, Hoosiers fall victim to the inappropriate actions of businesses seeking to take advantage of them. This settlement is a positive step toward holding businesses responsible for their conduct.”
Settlement debt forgiveness applies to cases in which Midland used an affidavit against consumers in court between 2003 and 2009. Midland will notify affected consumers by mail of the balance reduction, and no further action is necessary from those consumers.
The settlement requires Midland to reform its affidavit signing and litigation practices. Midland must carefully 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 about why any additional fees are justified.
The settlement requires that Midland maintain proper oversight and training over its employees and the law firms that it uses. The agreement prohibits Midland from reselling debt for two years.