As part of a $6 million settlement with Encore Capital Group Inc., 33 Hawaii consumers will no longer have to pay a balance of $40,800.
The state Office of Consumer Protection announced today that Hawaii was among 41 states and the District of Columbia that reached the settlement with Encore and its subsidiaries, Midland Credit Management Inc. and Midland Funding LLC, which together are the nation’s largest debt buyers.
In addition, the state will also receive about $77,000 to be used for consumer protection purposes.
The states challenged Midland’s collection and litigation practices, alleging that the company signed and filed affidavits in state courts in large volumes without verifying the information printed in them, a practice commonly called robo-signing.
“This case sends a strong message that robo-signing will not be tolerated in Hawaii,” said Office of Consumer Protection Director Stephen Levins in a news release. “Attesting to information in an affidavit without verifying the claim is plainly improper and has no place in our system of justice. Our investigation revealed that Midland repeatedly did this in Hawaii and in other states. Through the joint efforts of consumer protection authorities across the country we believe that the practice will now be corrected.”
Debt buying involves buying and selling overdue debts from creditors and other account owners, often for pennies on the dollar. The debt buyers then seek to recover the full balance from consumers through collection attempts by phone and mail or taking them to court. Borrowers, however, are often unable to afford attorneys, and some cases result in default judgments, damaged credit ratings and wage garnishment (wages withheld by the employer).
The settlement requires Midland to reform its practices by carefully verifying the information on its affidavits, in addition to presenting accurate documents in court proceedings. Before filing a lawsuit, the company must have documents about the debt, including the amount, proof of an agreement and explanation of why any additional fees are justified. All consumers must also receive accurate information about their debts from Midland, with substantiating documents provided at no charge.
The settlement requires Midland to maintain proper oversight and training of its employees and its law firms. As part of the agreement, Midland is also prohibited from reselling debt for two years.
Midland will notify affected consumers — those who were issued a court affidavit between 2003 and 2009 — by mail of the balance reduction. Affected consumers do not need to take any further action.