Archive for 'Encore Capital Group'

Appellate Court Throws Out Settlement in Encore Capital Robo-Signing Case

Thursday, March 21st, 2013 at 5:50 pm  
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In August 2011, a federal judge approved a $5.7 million settlement in a class action lawsuit brought against Encore Capital Group and its Midland subsidiaries. The case revolved around the practice of “robosigning” affidavits, which in turn were used to sue consumers and obtain judgments against them. Because the case was precedent-setting, 38 state attorneys general, the Federal Trade Commission, and consumer advocacy groups filed amicus briefs urging the judge to reject the settlement proposal.

Late in February, the 6th Circuit Court of Appeals voided the settlement, which would have awarded each consumer a measly $17. The appellate court ruled that the lower court judge had abused his discretion in approving the settlement, and that the monetary relief to consumers was “perfunctory at best.” The court also noted that the order meant to prevent Midland from engaging in robosigning behavior was hollow, in that it didn’t prohibit false affidavits and expired after one year. The case was remanded to the district court.

Encore Capital Group Buys Asset Acceptance

Tuesday, March 12th, 2013 at 5:40 pm  
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Encore Capital Group (NASDAQ: ECPG) recently announced that it will acquire Asset Acceptance Capital Corp. (NASDAQ: AACC), a move that amplifies the mergers-and-acquisition landscape of the debt collection industry. Both Encore Capital Group (which does business as Midland Credit Management) and Asset Acceptance are major players in the debt buying business, and the merger of the two will create a behemoth that, according to an Encore press release, represents the purchase of “over 60 million individual consumer accounts…with a face value of over $130 billion.”

While Asset Acceptance will continue as a subsidiary of Encore Capital Corp., Encore CEO Brandon Black said, “This acquisition moves our industry into a new phase of maturity defined by more efficient companies that are committed to operating ethically and treating consumers with respect.” According to Justia.com, during 2013 Encore has been named as a defendant in a dozen lawsuits alleging violations of the Fair Debt Collection Practices Act, while Asset Acceptance has been named as a defendant in three dozen lawsuits. The Better Business Bureau gives Encore and Asset Acceptance each a B+ rating, and has logged 1190 closed Encore complaints and 903 closed Asset Acceptance complaints within the past three years.

The proposed merger, which has to undergo review by securities regulators, is expected to occur during the second quarter.

Encore Capital Group Finds Alternatives to Debt Collection Calls

Wednesday, February 20th, 2013 at 6:26 pm  
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The Encore Capital Group (NASDAQ: ECPG) is a huge debt buyer. According to an article in the Wall Street Journal, Encore is also positioning itself to rake in more profits. The company is investing in cloud infrastructure and software that will enable consumers to access a self-service web portal. The article says that, once implemented, debt collection phone calls and concomitant telecommunications costs will go down. We suspect that, with fewer outbound calls from debt collectors, Encore will also reduce its liability risk for violations of the Fair Debt Collection Practices Act. That’s a good thing for everyone involved.

Encore Capital Group Investors Investigate Directors

Tuesday, February 28th, 2012 at 5:00 am  
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In early February, debt buyer Encore Capital Group (Nasdaq: ECPG) announced that its 2011 profit rose to $61 million – an increase of almost 25% over 2011. A few days later, The Shareholders Foundation issued a press release announcing that some members of Encore Capital Group’s board were being investigated by a law firm on behalf of Encore’s shareholders. The release said that the investigation revolves around potential breaches of fiduciary duties, namely allegations that the debt buyer engaged in business practices that violated the Fair Debt Collection Practices Act and state statutes. The release goes on to cite a number of actions taken against Encore Capital Group and its subsidiaries, Midland Credit Management and Midland Funding. Those include various class action lawsuits, an action by the Texas Attorney General, and the North Carolina Department of Justice.

Judge Approves Settlement in Encore Capital Case

Tuesday, August 16th, 2011 at 3:16 pm  
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robosignA federal judge approved a $5.7 million settlement in a bellwether class action suit against Encore Capital Group and its Midland subsidiaries. At issue was the practice of “robo-signing” affidavits, in which debt collection agency personnel attested to the accuracy of documents relating to the debts in question without actually reviewing the documentation. These affidavits were then used to support court cases against consumers and obtain judgments against them.

The practice of “robo-signing” made headlines in the past year in relation to home foreclosures, in which workers claimed they signed several hundred affidavits a day – something that’s impossible to do if they were truly reviewing and attesting to the documentation.

There was widespread concern that the proposed settlement in the Encore/Midland case would set a legal precedent that would make it difficult to bring other robo-signing companies to justice. Indeed, 38 state attorneys general and the Federal Trade Commission filed briefs urging the judge to reject the settlement.

The judge ruled that the settlement – which entitles each of the 1.44 million consumers who are members of the class an award of $17.38 – was fair, in that it included language requiring Encore/Midland to change its policies regarding affidavit signing.

It is a shocking miscarriage of justice to award damages of less than 20 bucks to consumers who were victims of a practice arising out of unmitigated greed and an apparent disregard for those whose lives were impacted by the judgments illegally obtained. The judge ruled that it was fair, and that the consumers who were members of the class had the opportunity to opt out and pursue separate legal action. Missing was an acknowledgment that consumers aren’t lawyers, and aren’t always aware of the implications of remaining a member of a class action. This decision will also likely have a chilling effect on valid lawsuits brought by other plaintiffs who were similarly victimized.

Although two attorneys general are pursuing separate legal actions against Encore, the debt buyer is conducting business as usual. According to a report by Thomson Reuters, Encore’s 2010 annual report indicated that the company had purchased $54.7 billion worth of debt for three cents on the dollar.

Texas Attorney General Files Against Encore Capital Group

Monday, July 11th, 2011 at 2:35 pm  
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Our June 24 post noted that the Federal Trade Commission and 38 state Attorneys General have opposed a proposed settlement in Vasalle v. Midland Funding LLC, its parent company Encore Capital Group, and Midland Credit Management. The judge in the case is scheduled to rule on the proposed settlement today (July 11), but Texas Attorney General Greg Abbott is leaving no stone unturned. On Friday, his office filed suit against Encore Capital Group, Midland Funding, and Midland Credit Management, charging the company with “falsifying and robo-signing affidavits, attempting to collect debts based upon inaccurate or incomplete account information, and employing unlawful and deceptive debt collection tactics.”

Why are these robo-signing practices so problematic? Debt collection agencies use sworn affidavits as a means of affirming to a judge that a consumer owes the debt in question. The vast majority of consumers don’t appear in court to defend themselves (often because they’re either not aware of a pending lawsuit against them), leaving the judge no option but to consider the affidavit proof and award the debt collection agency a judgment against the consumer. With a judgment in hand, the debt collector can go about enforcing the judgment, which in many cases involves seizing money from the consumer’s bank account.

If the foundation of an affidavit is faulty – if it’s based on erroneous information that a debt collection agency employee never checked into – a judgment has serious consequences for the consumer. A press release issued by the Texas Attorney General noted that Encore and Midland filed more than 60,000 lawsuits in Texas since 2002, and that:

“Court documents filed by the State indicate the defendants sometimes even used incomplete or inaccurate account information, targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid. As a result, some Texans unnecessarily suffered financial hardships, such as improperly decreased credit ratings, loss of job opportunities or the ability to refinance their home.”

FTC, AGs Oppose Midland Funding Class Action Settlement

Friday, June 24th, 2011 at 12:00 pm  
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robosignThe Federal Trade Commission has filed an amicus brief in the U.S. District Court for the Northern District of Ohio, opposing a class action settlement in Vassalle v. Midland Funding LLC, its parent company Encore Capital Group, and Midland Credit Management. The lawsuit alleges that the debt buyer and debt collector violated the Fair Debt Collection Practices Act and related state law by engaging in the robo-signing of affadavits.

According to the FTC’s press release, if the court accepts the proposed settlement, “class members will have to give up too much in exchange for too little.” The settlement proposes that class members receive a maximum payment of $10, for which they’d “surrender their rights under the FDCPA and state laws to challenge Midland’s actions related to the company’s use of affidavits in debt collection lawsuits. This would include, the FTC argues, perhaps even the right to challenge improper default judgments obtained by Midland.”

The FTC’s amicus brief follows on the heels of the opposition of 38 state Attorneys General. According to the Wall Street Journal, the AGs argued that “approval of the deal would help the debt collection industry dodge enforcement actions by state officials,” and that Midland and Encore could use the settlement to argue that similar robo-signing lawsuits in other jurisdictions should be thrown out.

The judge in the case is scheduled to rule on the proposed settlement July 11.

More Evidence that Debt Collectors are Exploiting the Legal System

Wednesday, December 1st, 2010 at 5:00 am  
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justiceOn several occasions, we’ve discussed a disturbing trend, one where debt collection agencies use the court system as a primary tool in collecting debt. As reported by the Wall Street Journal, this tactic is putting a strain on the taxpayer-funded courts. The Journal quoted one Illinois judge as saying, “There exists a real danger that the courts will be perceived as mere extensions of collection agencies.” That same judge said that there have been as many as 400 debt collection cases on his docket in a single day.

The article goes on to report that Encore Capital Group, parent of Midland Funding, filed 245,000 lawsuits last year, and that approximately 94% of lawsuits result in default judgments. Debt buyers purchased $100 billion worth of debt last year, and often turn to the courts first; the Journal reported that an Indiana small claims court judge placed a limit on how many debt collection cases law firm Bowman, Heintz, Boscia & Vician could file every two weeks…. The limit was 500 cases every two weeks!

Default judgments occur when consumers don’t show up in court, often because they don’t even know they’re being sued. If more than 90% of debt collection cases result in default judgments, it’s clear that the court system isn’t being used fairly or justly, and that the taxpayer is footing the bill for debt buyers to scoop up profits. Indeed, Encore, the parent of Midland Funding, took in almost $243 million last year as a result of default judgments. That’s just wrong.

Debt Buyers Prey on New Yorkers

Monday, June 7th, 2010 at 5:00 am  
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It isn’t a surprise that a recent study issued jointly by the Legal Aid Society, Neighborhood Economic Development Advocacy Project, MFY Legal Services, and Urban Justice Center found that debt buyers are abusing the legal system to prey on lower-income New Yorkers.

Debt buyers are companies that purchase debt from original creditors who have written off unpaid balances as “uncollectible.” Debt buyers buy this bad debt for pennies on the dollar, and then turn around and put the squeeze on consumers to pay the full amount.

The report explains that publicly traded companies like Asset Acceptance Capital Corp., Asta Funding, Encore Capital Group, and Portfolio Recovery Associates have to reveal more about their practices than private companies, which the study says number around 500. It notes that debt buyers often don’t have the documentation to back up their claims against consumers, saying, “Debt buyers usually receive an electronic file that includes only a person’s name and social security number, last known address, the amount allegedly owed, the charge-off date, and the date and amount of the last payment. The portfolio does not include documentation of the debt, such as the governing contracts and account statements. This information is insufficient to ensure that the debt buyers collect the correct amount from the correct person. Debt portfolios are regularly sold on an ‘as is’ basis, without consideration for whether collection of the debts in the portfolio is legal.”

In New York, debt buyers are filing an unprecedented number of lawsuits against consumers – disproportionately lower-income consumers – without ever providing people with legally mandated notifications. The result? People never know they’re being sued, so they don’t show up for court. When they don’t show up for court, the judge rules in the debt buyers’ favor and people have their wages garnished, their bank accounts cleaned out, and their credit ruined.

The study found that these “default judgments” happen over 94% of the time, and that 95% of those who have default judgments against them live in low or moderate income neighborhoods. Even more outrageous is that only 1% of consumers in New York City who are sued by debt buyers are represented by an attorney.

Reading the study will make your blood boil, but it’s a crucial first step in putting an end to these predatory practices. You can download a copy of the report at Urban Justice Center.