Debt buyer Midland Funding has agreed to pay or forgive debts for Idahoans to settle claims brought by dozens of states. The company is accused of robo-signing affidavits in debt-collection lawsuits and failing to make sure it could legally collect the money.
Attorney General Lawrence Wasden announced Tuesday that Idaho has joined the $6 million multistate settlement with Encore Capital Group Inc. and its subsidiaries Midland Credit Management Inc. and Midland Funding LLC.
The settlement follows a six-year investigation, Wasden said.
Midland is one of the nation’s largest debt buyers. It buys overdue accounts from other companies, paying pennies on the dollar, then tries to collect the money. Often, debt buyers use lawsuits to collect the debts.
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A Statesman investigation in 2012 found that debt buyers were suing Idahoans en masse and almost always won by default, after their claims went unchallenged. The companies didn’t have to produce evidence that they were legally entitled to collect the debts.
The Statesman examined court records and found that, in one year, just in Ada County, Midland Funding had won $1.52 million in judgments. That often included interest and attorneys’ fees.
“The vast majority of those lawsuits went unchallenged, giving the debt buyer a near-automatic victory in court and a shot at garnishing wages on judgments of about $600 to about $31,000,” the Statesman reported in 2012.
Following the financial crisis of the late 2000s, the number of debt buyers licensed to collect from Idahoans skyrocketed, the Statesman found. Five companies were doing business in Idaho in 2008; by 2012, there were 99.
“The settlement resolves the states’ investigation into Midland’s collection and litigation practices that involved Midland robo-signing large volumes of affidavits without verifying the information and filing lawsuits without proof of the underlying debts,” Wasden said in a news release sent out Tuesday.
The settlement requires Midland to now “carefully verify the information in affidavits and present accurate documents during court proceedings.”
The company also must give consumers “accurate information about valid debts” and, if consumers dispute a debt, Midland must provide evidence of the debt — already a requirement under federal law.
“Consumers often find themselves at the mercy of aggressive debt collectors, unable to afford attorneys and doing battle on their own,” Wasden said in the news release. “They can wind up with judgments for more than the original debts, damaged credit and the possibility of wage garnishments. This settlement helps level the playing field.”
Midland agreed to wipe out or reduce the balance owed for people sued between 2003 and 2009, in cases where Midland used an affidavit in court. That includes 26 Idaho accounts and a total reduction of $39,295, Wasden said.
The company also agreed to set aside $25,000 to compensate Idahoans who may have paid money they didn’t really owe.
Anyone who’s affected by the settlement will get a notice in the mail from Midland, Wasden said.