Texas AG files suit against debt collector

Nick Rees Jul. 10, 2011, 5:14am


HOUSTON (Legal Newsline) – Texas Attorney General Greg Abbott charged Encore Capital Group Inc., on Friday with state debt collection law violations.

The alleged violations include attempting to collect debts based upon inaccurate or incomplete account information and employing deceptive and unlawful debt collection tactics.

Abbott alleges multiple violations of Texas debt collection laws and the Texas Finance Code. Encore and its subsidiaries – Midland Funding LLC and Midland Credit Management Inc. – are named as defendants in the case.

Abbott alleges that Midland Funding purchased debt portfolios from a broad spectrum of creditors for pennies on the dollar and attempted to collect the money that was owed to various creditors.

The defendants' debt collection letters allegedly contained very little information about the debt they were attempting to collect, included no proof that they actually acquired the debt from the original creditor and provided no supporting documentation. The defendants allegedly made little or no effort to investigate or verify whether their collection efforts were proper when Texans contacted the defendant.

In addition, the defendants' allegedly used inaccurate or incomplete account information, targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid. Some Texans allegedly suffered financial hardships, loss of job opportunities or had improperly decreased credit ratings as a result.

If individuals would not comply with Midland Funding's collection efforts, the defendants allegedly hired attorneys to sue the accused debtors, who filed breach of contract lawsuits demanding principal, interest and attorneys' fees. The defendants have allegedly filed over 60,000 lawsuits in Texas since 2002 containing inaccurate information and using false statements to claim they were owed certain debts.

The defendants allegedly submitted false affidavits that the courts relied upon as proof that the debt collector properly verified the identity of the debtor and the amount owed. The defendants also allegedly employed "robo-signers," which signed over 300 affidavits per day without reviewing the underlying credit agreements, to supply the legally required verification.

Due to the allegedly falsified affidavits, Abbott alleges that the defendants defrauded the Texas judicial system, which led to multiple default judgments falsely entered against the purported debtors.

Abbott's enforcement action seeks to establish a restitution trust fund for the money the defendants unlawfully coerced from Texans, civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act and penalties that apply under the Texas Finance Code for third party debt collectors who violate state law.

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