CFPB sues Midland Funding and Midland Credit Management for violating FDCPA
CFPB sues Midland Funding and Midland Credit Management for violating FDCPA
On September 8th, 2020, the CFPB filed a case against Midland Funding and its related companies which make up one of the largest debt buyers in the country.
This is a big deal.
We have a Republican administration with a CFPB that has been scaled back considerably.
But what Midland is doing is so bad that even this scaled-back CFPB decided to file suit.
The Bureau of Consumer Financial Protection, more commonly known as the CFPB, has sued the biggest debt buyers in the nation. The company Encore and its associated companies are Midland Funding, Midland Credit Management, and Asset Acceptance.
The CFPB is suing for violations of the FDCPA and a 2015 consent order that these companies entered into with the CFPB for violating various laws.
Now they are violating these laws again.
The Introduction
In the first paragraph of the suit, the CFPB points out that this is the second time they are having to do this.
They have violated the Consumer Financial Protection Act of 2010 and the FDCPA.
Midland agreed and promised to do certain things, but has been violating the consent order and federal law.
The Parties:
Encore Capital Group, Inc.
- Parent company
- Based in San Diego
Midland Funding, LLC
- Owned by Encore
- Based in San Diego
Midland Credit Management
- Owned by Encore
- Operates closely with Midland Funding
- Often, we sue both MCM and Midland Funding together
Asset Acceptance
- Former competitor
- Bought out by Encore
All of these companies together form the largest debt buyer and collector in the United States with a staggering annual revenue of over $1 billion.
The purpose of these companies is to buy defaulted debt and then collect it from consumers. This purpose is also stated in their financial documents filed with the securities and exchange commission (SEC).
This principle purpose labels each company as a debt collector under the FDCPA.
The following information will be especially helpful if you are dealing with Midland or one of its related companies whether they are suing you or contacting you for any debt.
In the 2015 consent order, all these companies promised to do certain things. They did not admit any wrongdoing, but they paid a lot of money (nearly $45,000,000 between consumers and civil penalties) and made promises.
Requirements of the Consent Order
OALDs
- They cannot sue you without having original account-level documents (OALD) defined in 2015 order.
- However, they filed hundreds of lawsuits without OALD.
Disclosures
- They must include certain disclosures when using their own legal department or a 3rd party law firm. They have to provide the consumer with the statement that either Midland or its agent (collection law firm) will provide the consumer with copies of the OALD at no cost.
- The bureau has found that at least 750,000 times, they made collection efforts without providing this disclosure. Despite having promised the government they would do so.
- More than 25,000 times they also omitted that the OALD would be provided within 30 days.
- On these accounts alone, they have collected more than $300 million.
30-day deadline
-
- The consent decree requires that the OALD be provided within 30 days of the request.
- However, 250 times they told the consumer they would provide these and failed to do so within the proper time frame.
- They have even gone so far as to file lawsuits without providing that documentation.
- This affects the consumer’s ability to determine whether the debt is truly owed and their decision about how to respond to the debts.
Time-Barred Debt
- Time-barred debt is debt that is beyond the statute of limitations (time period to sue in your state).
- According to the order from 2015, they cannot collect on these debts without certain disclosures.
- They have filed lawsuits which they were not supposed to do, suing consumers outside of the statute of limitations.
Collecting on the Debt
- When sending collection letters, they were supposed to include one of two statements:
- “The law limits how long you can be sued on a debt and how long a debt can appear on your credit report. Due to the age of this debt, we will not sue you for it or report payment or non-payment to a credit bureau.”
- “The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it.”
- The time period to sue is not necessarily the same time period to credit report. Your state might say they have to sue within 3 years, but they can credit report for 7 or 7 1/2 years from the date of default. If it has been 8 years, they need to include this disclosure.
- They sent out 425,000 letters to collect time-barred debts without this disclosure.
Failure to disclose incurred fees
- This is one of the strangest claims in the suit.
- Beginning in mid-2016, began using a payment processor based in a foreign country. So, sometimes when you would pay, you were getting hit with international transaction fees.
- They didn’t disclose that this fee was possible.
- “Consumers have no control over how Encore processes payments and had no reason to believe that their payments to Encore – a domestic company- could result in international transaction fees.”
Why is the CFPB suing?
Count I: They violated the CFPA by violating the order.
- Suing without OALD.
- Legal collections without required disclosures.
- Didn’t provide OALD within 30 days.
- Sued on time-barred debts beyond the statute of limitations.
- Collected or attempted to collect on time-barred debts without required disclosure.
Count II: Deceptive Acts and Practices
Midland has done things that mislead or deceive people. Doing so violates the CFPA.
Representations were made saying they would provide OALD were deceptive.
They illegally sued on time-barred debts.
In the complaint, the CFPB states, “These lawsuits represented implicitly or explicitly that consumers had legally enforceable obligations to pay these debts.”
However, the consumers had no legally enforceable obligation to pay on these debts because the statute of limitations had passed.
These representations mattered because they were likely to affect consumers’ choices about how to respond to their debts.
“A consumer, especially one with limited resources, is more likely to pay an obligation that is legally enforceable than one that is not because consequences of failing to repay the former are more severe than for the latter.”
Count III: Violations of the FDCPA
This is the part that we can use as consumers.
Section 807 (more commonly known as 15 U.S.C § 1692e) says don’t do anything deceptive or misleading and provides examples.
- No false representation as to the legal status of a debt
- Prohibits threats to take action that cannot legally be taken or that is not intended to be taken
- Prohibits false representations or deceptive means to collect any debt.
- Representations to provide OALD were false.
- Lawsuits on time-barred debts were misleading.
- Consumers did not have legally enforceable obligations to pay these debts.
The point is, the debt collectors shouldn’t do anything that is unfair.
Most courts say that suing after the statute of limitations has expired is an unfair act. It is both deceptive and unfair.
What does the CFPB want?
The CFPB wants
- An injunction that tells the defendant to stop violating the law along with other injunctions
- They want damages against the defendants
- They want the defendants to pay money to the consumers
- Required to repay any money which was obtained illegally
- Penalties
- Pay bureaus cost to file suit
What does this mean for you?
There is an idea among some judges that if companies agreed to a consent order, they wouldn’t turn around and violate it again. However, these companies act in foolish arrogant ways.
They say, “Come on judge, do you really think we would do that?”
We point out that this is the case when we sue these companies. Now we have the CFPB suing them saying exactly the same thing.
Now, if you have been dealing with Encore in any form – Midland Funding, Midland Credit Management, Asset Acceptance – they are on your credit reports, you’re getting letters from them, or they’re suing you, then you need to look at this and determine whether they have violated the consent order in your situation.
How easy is it to use the violation of the consent order in a private lawsuit that you have filed?
This may require some research but could serve to bolster your argument in court. For example, they have promised to do certain things in the consent decree but they violate it.
Are they being deceptive?
Have they failed to provide OALD?
When we look at all of this together, this is very bad for Midland.
Currently, we are under a Republican administration. In many cases, Republican administrations tend to be less favorable towards consumers.
As soon as President Trump took office, the director of the CFPB at the time decided to try and gut the bureau as much as possible.
How bad are these companies acting for the current administration to bring this lawsuit against the largest debt buyer in the country?
If you are dealing with Midland, assume they are breaking the law. Look at everything. Check everything on your credit reports.
Now through April 2021 you can pull your credit reports weekly at no cost.
Check all the details because it is likely they are doing something wrong.
Get with a lawyer in your state to see what your options are.
Encore, Midland, and Asset Acceptance will likely try to fight back very hard against this because it will be a tremendous cost to them and it will hurt their efforts in lawsuits around the country. Now, consumers can show how crooked they are.
Even if this isn’t admissible evidence in your state, the judges will start to realize how crooked they are and be more careful in ruling against consumers.
If you are in Alabama feel free to call us at 205-879-2447 or contact us here and we’ll be happy to discuss this with you.
Best wishes
John Watts
P.S.
If you would like to look at the full documents referenced in this article, they can be found here: