The Attorneys General of 42 states and the District of Columbia (collectively, the States) have entered into an Assurance of Voluntary Compliance/Assurance of Discontinuance  (Agreement) with Encore Capital Group, Inc. and its subsidiaries, Midland Funding, LLC and Midland Credit Management, Inc., (collectively, Midland) to settle allegations relating to Midland’s debt collection practices.  According to a press release from the Illinois AG, which describes Midland as one of the nation’s largest debt buyers, Midland engaged in a “pattern of signing and filing affidavits in state courts against consumers in large volumes without verifying the information printed in them – a practice commonly called robosigning.”

The Agreement requires Midland to pay $6 million to the States which, at the sole discretion of their AGs, shall “be used for reimbursement of attorney’s fees and/or investigative costs, used for future public protection purposes, placed in or applied to the consumer protection enforcement fund, consumer education, litigation, or local consumer aid fund or revolving fund, or similar fund [for consumer protection purposes].”  Midland must also internally set aside $25,000 per State for restitution to consumers and provide a credit of up to $1,850 to the outstanding balance of certain judgments it obtained involving disputed debts.

The Agreement contains various requirements for Midland’s collection practices, including the following:

  • Midland cannot collect or attempt to collect a debt unless it has in its possession the information specified in the Agreement
  • In the circumstances specified in the Agreement (which include the consumer’s dispute of the debt, the debt’s purchase through a purchase agreement without meaningful representations and warranties as to the debt’s accuracy or validity or without meaningful commitments to provide original account-level documentation or in a portfolio known by Midland to contain unsupportable or materially inaccurate information of the debt), Midland cannot represent that a consumer owes a debt or its amount without reviewing certain account-level information
  • For accounts as to which Midland has not yet begun collection activity, Midland cannot begin such activity without determining whether the debt has a special status (i.e., a bankruptcy, a deceased consumer, or a consumer who is an active duty service member) and if the debt is determined to have such a status, Midland must satisfy certain conditions to collect the debt
  • Until September 2020, Midland can only resell debts to anyone other than an entity described in the Agreement  (such as an entity that initially sold the debt to Midland)
  • Midland may not initiate a collection lawsuit unless it has specified documentation in its possession and has provided specified information to the consumer and must provide certain instructions to all of the attorneys it uses to conduct collection litigation on its behalf
  • Midland’s affiants may not sign an affidavit in connection with collection litigation unless the facts stated in the affidavit are based upon the affiant’s review of pertinent records in Midland’s possession and any personal knowledge “gained by those records actually reviewed by and relied upon by the affiant.”
  • Midland may not pay incentives to employees or third-party providers based solely on the volume of affidavits prepared, verified, executed, or notarized.
  • Midland’s procedures for the generation and use of affidavits in collection litigation must require those employees who review and sign affidavits to perform certain tasks, such as confirming that all of the data points in the affidavit accurately reflect Midland’s records prior to executing the affidavit
  • Midland may not knowingly pursue or threaten to pursue collection litigation on any time-barred debts and any communications with consumers about time-barred debts must include specified disclosures

Other provisions require Midland to comply with the FDCPA, the FCRA, and applicable state laws pertaining to its debt collection activities, appropriately staff teams that resolve disputes and address consumer questions, maintain a mandatory training program for its employees, and conduct call monitoring.

In a press release about the settlement, Midland stated that “[t]he issues that were the genesis of the settlement have not been the company’s practice for nearly 10 years” and that while it believes its practices were in accordance with relevant laws, it “chose to agree to a settlement, so we can all move ahead.”  The press release also stated that nearly all of the Agreement’s operational requirements are already part of Midland’s current practice and most requirements were implemented during or prior to Midland’s negotiations with the AGs.