Yesterday, Encore Capital Group, Inc. (Encore) entered into a $6 million settlement agreement with several state Attorneys General. The matter involved Encore, its subsidiaries Midland Funding, LLC and Midland Credit Management, Inc., and 42 states (see list below) and the District of Columbia. In addition to the $6 million, Midland must also internally set aside $25,000 per state for restitution to consumers. According to a press release by the Illinois Attorney General, this investigation revolved around the alleged practice of “robosigning” affidavits used in collection litigation.

The settlement agreement sets forth certain requirements for Midland. A large portion of the agreement discusses requirements that largely parrot the text of the Fair Debt Collection Practices Act (FDCPA) and the Fair Credit Reporting Act (FCRA).

In relation to collection litigation, the agreement requires Midland to, among other things, ensure it has account-level documentation prior to commencing lawsuits against consumers and that such documentation is available to its retained law firms without restriction. Midland must also ensure that any affidavit filed is hand-signed and based on the affiant’s personal knowledge from reviewing account records. Midland cannot pay incentives to its employees or third-party providers based on volume of executed affidavits.

In relation to general collection activity, the agreement requires Midland to follow certain procedures to verify that the consumer listed on the account owes the debt, ensure the account or consumer in question is not in some special status (i.e., bankruptcy, deceased, or an active duty service member), limit to whom it can resell a debt, conduct background checks on new employees, appropriately staff teams that resolve disputes and address consumer questions, maintain a mandatory training program for its employees, and conduct call monitoring. The agreement also discusses procedures for time-barred debt.

Encore issued a press release stating that this settlement will cause no material impact to the business as the funds have been set aside back in 2015. According to the press release, many of the operational requirements contained in the agreement are already in practice. Ashish Masih, Encore’s President and CEO, states that discussions related to this agreement began many years ago while the company was having parallel discussions with the Bureau of Consumer Financial Protection. “While we believe our practices were in accordance with relevant laws, we chose to agree to a settlement, so we can all move ahead,” says Masih.

States involved: Alaska, Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Mississippi, Missouri, Montana, Nebraska, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming.

insideARM Perspective

The settlement agreement here is worth a read, especially for debt buyers and entities engaged in collection litigation. Other than the section that is dedicated to an almost word-for-word transcription of the FDCPA and FCRA, the agreement lays out in specific details practices that the Attorneys General expect. It never hurts to check a company’s policies and procedures against the requirements outlined in the agreement to make sure that there are no gaps. Considering that this agreement was entered into by a majority of state Attorneys General, it is likely that these procedures are universal.


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