Attorney General Gurbir S. Grewal announced today that New Jersey has entered into a settlement agreement with Encore Capital Group, the corporate parent of Midland Credit Management, Inc. and Midland Funding, LLC, to resolve allegations that Midland engaged in deceptive debt collection and litigation practices.
Under the settlement, Midland will provide $1.85 million in direct relief to eligible New Jersey consumers and modify its business practices.
Based in San Diego, Midland is one of the country’s largest debt-buying companies. Debt buying involves acquiring overdue debts—often for pennies on the dollar—from creditors and other account owners. Debt buyers then attempt to collect the full balance of the debt from the borrowers, including by telephone and mail, and through lawsuits.
The settlement is the result of a multi-state investigation focused on complaints that Midland routinely filed in court affidavits claiming that consumers owed debts and fees when the person signing the affidavit had no personal knowledge about the underlying facts and had not reviewed relevant files. This practice is commonly known as “robo-signing.”
Debt-collection lawsuits based on robo-signed documents frequently target people who cannot afford an attorney, resulting in either fear-driven payoffs to the debt collector or court-issued default judgments based on unverified information.
“Today’s settlement provides relief to individual New Jersey residents affected by Midland’s past misconduct and protects everyone in our State from similar abuses by Midland in the future,” said Attorney General Grewal.
“This settlement also sends a message to other debt-buying and debt-collection companies, whose misconduct harms far too many New Jersey residents,” Attorney General Grewal continued. “With my office’s renewed commitment to consumer financial protection, we will put an end to unconscionable and deceptive practices by debt buyers and debt collectors.”
Among other terms, the multistate settlement with Midland requires the company to reform its affidavit-signing and litigation practices. The company must carefully verify information contained in affidavits before signing them, and must present accurate documents in court proceedings against alleged debtors. In addition, Midland must possess account documents concerning an alleged debt before filing a lawsuit to collect debts and fees. The documents must include information regarding the amount of the debt, as well as proof of an agreement and an explanation as to why any additional fees are justified.
Other aspects of the settlement require that Midland properly train its debt collection employees, litigate in good faith, supply accurate information to consumer reporting agencies and deal appropriately with disputed debt or time-barred debt.
The consumer protections included in the settlement announced today extend beyond Midland’s litigation conduct. Under the settlement, Midland must provide all debtors with accurate information about valid debts and, if a debtor disputes an asserted debt, the company must review original account documents before continuing its collection efforts. Midland also must provide consumers with free copies of the original account documents.
In addition, the settlement requires that Midland maintain proper oversight of the law firms it hires to litigate on its behalf. The agreement also prohibits Midland from reselling any debt it purchases for a period of two years.
As part of the settlement, Midland will eliminate or reduce the judgment balances of consumers who Midland sued between 2003 and 2009 if Midland used an affidavit against them in court, Midland obtained a judgment against the consumer, and the consumer disputed the debt.
In New Jersey, more than 1,000 consumers are expected to receive a reduction or elimination of their judgment balances from Midland. Those consumers will be notified by mail. In addition to the direct consumer relief being paid by Midland to New Jersey consumers, the State of New Jersey will receive $60,000 from an overall settlement payment being made by Midland to the participating states.