Who is Midland Credit Management and Why were they Ordered to Pay Millions to Consumers?
Recently the Consumer Financial Protection Bureau (“CFPB”) took action against two of the largest debt buyers, Encore Capital Group and Portfolio Recovery Associates, LLC for using deceptive tactics to collect on old and charged off debts. Encore Capital Group may not be a household name, but the company owns Midland Credit Management, Midland Funding, LLC and Asset Acceptance Capital Corp., all of which are parties that actively collect against consumers in Washington State and whom I deal with on a regular basis in my bankruptcy and debt settlement practice. I recently discussed this topic with James Gore on his radio show on 1150AM KKNW which you can listen to here:
The main issue with these debt collectors is that they are collecting on debts that they simply can not validate or provide any documentation to prove that a consumer owes the debt. Letters requesting validation of such debts were being ignored in violation of the Fair Credit Reporting Act (FCRA), and consumers were being pressured to settle lawsuits when the debt collectors had no evidence of the debts. Having dealt with these debt collectors on a regular basis I can attest to many of the tactics that they have been accused of including failing to validate debts, filing lawsuits on debts that are past the statute of limitations, and filing proofs of claims in chapter 13 bankruptcy cases on stale debts or debts that have been discharged in a previous bankruptcy filing.
Ultimately the CFPB entered into a stipulation agreement where Encore must pay up to $42 million in consumer refunds and a $10 million penalty, and stop collection on over $125 million worth of debts. Portfolio Recovery Associates must pay $19 million in consumer refunds and an $8 million penalty, and stop collecting on over $3 million worth of debts.
The prime reason for the defendants clear violation of consumer laws is that they don’t have a system in place in which to track debts and make sure they are following the laws. When these debt buyers purchase a debt they do so for pennies on the dollar in the hopes the consumer will succumb to a default judgment in the creditors favor or be compelled to settle from collection calls and mailings over a period of time. A default judgment means that a debt collector has sued you but that you failed to respond or file an answer in the case. A default judgement could happen for various reasons such us ignoring or not knowing what to do after receiving a summons and complaint, changing addresses, or another party being served and didn’t inform the consumer of the lawsuit. Generally, alleging that you were not properly served is not enough to throw out the lawsuit unless you dispute the debt in question as well. If that happens you would have to file a motion to set aside the judgment that has already been entered against you.
At the time of purchasing debts, these companies do so in bulk using large data files which provide no paperwork confirming that the consumer actually owns the debt in most cases. Overhauling their systems to comply with the laws would cost millions if not billions and it’s possible the debt collectors believe it’s cheaper just to pay a fine. The parties stipulated that they would overhaul there practices and procedures but only time will tell if that actually happens.
If you have been in contact with Midland Credit Management, Midland Funding, Asset Acceptance or Portfolio Recovery and you live in Washington State, give Symmes Law Group a call at 206-682-7975 to learn about your options. If you would like to learn how to deal with Midland Credit Management Midland Funding, Asset Acceptance or Portfolio Recovery on your own check out my DIY debt collection response course complete with sample materials and forms.