North Carolina Attorney General Josh Stein announced the state reached a $6 million settlement with Encore Capital Group, Inc. and its subsidiaries Midland Credit Management, Inc. and Midland Funding LLC.
Midland will completely eliminate or reduce judgment balances for approximately 2,176 North Carolinians valued at $3,327,099. All of the cases were filed between 2003 and 2009 and involve Midland using an affidavit against the individuals in court.
Midland will also pay up to $25,000 to compensate anyone who may have paid them money they did not actually owe. The company will notify all impacted consumers by mail.
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Attorney General Stein said the settlement also permanently prohibits Midland from practicing what he calls "damaging" debt collection practices in the future.
The company will be required to verify information provided in affidavits and present accurate documents in court proceedings.
If a consumer disputes a debt Midland is attempting to collect, the company will be required to review original account documents before continuing with collection efforts and provide those documents to the consumer free of charge.
Forty-one other states and the District of Columbia are also part of the settlement. The agreement comes after an investigation into Midland's collection and litigation practices. The settlement claimed Midland signed and filed large numbers of affidavits in state courts without verifying information included in them. It is a practice commonly referred to as robo-signing.
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Encore Capital Group, Inc. is one of the nation's largest debt buyers. Debt buying involves buying and selling overdue accounts from creditors or account owners, often for pennies on the dollar. The debt buyers then work to recover the full balance from consumers through collection attempts by phone and mail. The buyers, including Midland, will often take consumers to court as part of their collection efforts.
If consumers are unable to defend the allegations the cases often result in default judgments which can damage credit and lead to wages being garnished.