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Hood announces settlement with debt buyers

photo courtesy of jim hoods office

Approximately 238 Mississippians will have judgement balances on debt completely eliminated or reduced thanks to a settlement recently reached by Attorney General Jim Hood and 41 states and the District of Columbia with Encore Capital Group Inc. and its subsidiaries Midland Credit Management, Inc. and Midland Funding, LLC, one of the nation’s largest debt buyers.

The $6 million settlement resolves the states’ investigation into Midland’s collection and litigation practices and settles claims that Midland signed and filed affidavits in state courts in large volumes without verifying the information printed in them, a practice commonly called robo-signing. Mississippi’s share of this payment will be $94,925.

Debt buying involves buying and selling overdue debts from creditors and other account owners. Often purchased for pennies on the dollar, debt buyers seek to recover the full balance from consumers through collection attempts by phone and mail. Debt buyers, including Midland, also take consumers to court to collect the debts they purchase. However, people are often unable to afford attorneys to defend the allegations and cases result in default judgments, hurting credit and putting people in jeopardy of having their wages garnished.

“The practice of robo-signing hurts consumers, especially our lower-income consumers who may not have the means to fight a debt collector in court,” said General Hood. “Midland illegally attempted to collect debts it had not verified through robo-signing and other illegal practices. Today’s settlement provides assurance to consumers that Midland will not abuse them again and serves as a warning to other dishonest companies.”

As part of the settlement, Midland will completely eliminate or reduce the judgment balances for approximately 238 Mississippi consumers for a value of $281,748 in cases where Midland used an affidavit against them in court between 2003 and 2009. Midland will notify impacted consumers by mail of the balance reduction, and no further action is necessary from the consumer. Midland will also set aside $25,000 per state to compensate consumers who may have paid Midland money that the consumer did not owe.

The settlement requires Midland to reform its affidavit signing and litigation practices. Midland must carefully verify the information in affidavits and present accurate documents in court proceedings. When Midland files a lawsuit, it must have account documents about the debt before they file the case, including the amount of the debt, proof of an agreement, and an explanation about why any additional fees are justified.

The settlement offers protections to consumers Midland is collecting from even if they are not being sued. All consumers must receive accurate information about valid debts. If a consumer disputes a debt Midland is collecting, the settlement requires Midland to review original account documents before it continues its collection efforts. Midland must provide these substantiating documents to the consumer for no charge. The settlement requires Midland maintain proper oversight and training over its employees and the law firms that it uses. The agreement prohibits Midland from reselling debt for two years.

Mississippi was joined in this settlement by attorneys general in the following states: Alaska, Alabama, Arizona, Arkansas, Colorado, Connecticut, Delaware, the District of Columbia, Florida, Georgia, Hawaii , Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Michigan, Missouri, Montana, Nebraska, Nevada, 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.

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