Friday, July 8, 2011

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Attorney General Abbott Charges Encore Capital Group with Violating Texas Debt Collection Laws

HOUSTON – Texas Attorney General Greg Abbott today charged Encore Capital Group, Inc. with falsifying and robo-signing affidavits, attempting to collect debts based upon inaccurate or incomplete account information, and employing unlawful and deceptive debt collection tactics. The State’s enforcement action cites the defendants for committing multiple violations of Texas debt collection laws and the Texas Finance Code. Encore, which is one of the nation’s largest debt collection companies, and its subsidiaries – Midland Funding, LLC and Midland Credit Management, Inc. – are named as defendants in the case.

According to state investigators, Midland Funding purchased debt portfolios from a broad spectrum of creditors for pennies on the dollar. As the purchaser of the debt, the defendants attempted to collect the money that was allegedly owed to various creditors. However, the defendants’ debt collection letters contained very little information about the debt they were attempting to collect, provided no supporting documentation, and included no proof that they actually acquired the debt from the original creditor. When Texans contacted the defendant to dispute the legitimacy of an alleged debt or seek additional information, the defendants made little or no effort to investigate or verify whether their collection efforts were proper.

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Attorney General's lawsuit against Encore Capital Group and subsidiaries

Court documents filed by the State indicate the defendants sometimes even used incomplete or inaccurate account information, targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid. As a result, some Texans unnecessarily suffered financial hardships, such as improperly decreased credit ratings, loss of job opportunities or the ability to refinance their home.

When individuals refused to comply with Midland Funding’s improper collection efforts, the defendants hired attorneys to sue the accused debtors. Court documents reveal that the defendants’ lawyers filed breach of contract lawsuits demanding principal, interest and attorneys’ fees. The defendants have filed more than 60,000 lawsuits in Texas since 2002. According to state investigators, the defendants’ lawsuits contained inaccurate information and used false statements to claim they were owed certain debts.

To protect Texans from being sued for debts they did not actually incur, the law may require that debt collectors verify the validity of their claims through “sworn affidavits.” However, the defendants submitted falsified affidavits, which the courts relied upon as proof that the debt collector properly verified the identity of the debtor and the amount owed.

The State’s investigation revealed that the defendants also employed “robo-signers” to supply the legally required verification. Court documents filed by the State indicate the defendants’ robo-signers routinely signed more than 300 affidavits per day and did not actually review the underlying credit agreements or the alleged debtor’s payment history. In sworn testimony provided to state investigators, the defendants’ robo-signers acknowledged that they also had no personal knowledge of the original debt or the defendant’s acquisition of the debt portfolios – which was contrary to the information contained in sworn affidavits that these defendants filed with the courts.

Because the court presumed the falsified affidavits were truthful, judges relied upon them to issue judgments against debtors. As a result, the Attorney General charged the defendants with defrauding the Texas judicial system by knowingly submitting false affidavits to state courts. Because 90 percent of the defendants’ lawsuits named individuals who were not represented by counsel, these purported debtors did not have lawyers to challenge the legitimacy of the defendants’ claims. As a result, default judgments were improperly entered against them based upon the defendants’ falsified affidavits.

The State’s enforcement action seeks to establish a restitution trust fund for money that the defendants unlawfully coerced from Texans. The Attorney General also seeks civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act, as well as penalties that apply under the Texas Finance Code for third-party debt collectors who violate state law.

Texans who believe they have been deceived by improper or unlawful business practices may call the Office of the Attorney General’s toll-free complaint line at (800) 252-8011 or file a complaint online at www.texasattorneygeneral.gov.