Attorney General Mark R. Herring announced today that Virginia 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 , one of the nation’s largest debt buyers.
The settlement requires Midland to eliminate or reduce the judgment balances of 689 Virginians totaling $879,729. Additionally, the settlement requires Midland to reform its debt buying and collection practices. Midland is also required to reserve $25,000 to reimburse Virginians who paid the company for debts that they did not owe, or who paid the company more than what they owed.
“Harmful debt buying and collection practices affect both Virginia consumers and the state’s economy,” said Attorney General Mark Herring. “We are holding Midland accountable for previous illegal practices and making sure that, moving forward, the company practices legal debt collection. With this settlement, we are able to give 689 consumers the restitution and relief that they deserve, while showing that Virginia will not tolerate businesses that take advantage of Virginians.”
The settlement comes as the result of a multistate investigation into Midland’s collection and litigation practices. Much like the conduct witnessed during the mortgage crisis, the agreement settles claims that Midland signed and filed affidavits in state courts in large volumes without verifying the information printed in them, a practice commonly called robo-signing.
As part of the settlement, Midland will completely eliminate or reduce the judgment balances of 689 Virginians for a value of $879,729 in cases where Midland used an affidavit against them in court between 2003 and 2009. Midland will notify impacted consumers by mail of the balance reduction and no further action is necessary from the consumer.
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 it files the case, including the amount of the debt, proof of an agreement, and an explanation about why any additional fees are justified.
The settlement offers protections to consumers from whom Midland is collecting, even if the consumers have not been sued. All consumers must receive 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. Midland must provide these substantiating documents to the consumer for no charge. 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.
The settlement further requires that Midland reserve $25,000 to reimburse Virginians who paid Midland for debts that they did not owe, or who made a payment to Midland in excess of what was actually owed. Consumers who made such payments, and who have not already received reimbursement from Midland, may file complaints with Attorney General Herring’s Consumer Protection Section. To receive consideration for reimbursement, consumers must provide supporting documentation that demonstrates that they made a payment to Midland in excess of a debt that was actually owed, or for a debt that they did not owe.
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 and cases result in default judgments, hurting credit and putting people in jeopardy of having their wages garnished.
Joining Attorney General Herring in today’s settlement were attorneys general from Alabama, Alaska, 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, Washington, Wisconsin, Wyoming, and the District of Columbia.