CFPB settles with Midland too cheap?

CFPB settles with Midland too cheap?

A picture of a question mark with the words, "CFPB settles with Midland too cheap?"

A little over a month ago, we discussed the Consumer Financial Protection Bureau (CFPB) and their lawsuit against Encore, Midland Funding, and its associated companies.

Now, they have proposed a settlement with these companies

Ultimately, it will be up to the judge to decide whether to accept this settlement or not. 

Personally, I think the settlement being proposed is very weak. 

They filed suit back on September 8th, 2020.

In this article we will look at a few key pieces of the settlement and why I do not believe it is a strong enough punishment on Midland for breaking the law. 

The findings:

The defendants (Encore / Midland) are not admitting anything. They are also not denying anything. 

They are only admitting facts that give the court power or jurisdiction over this case. 


Here are a few important definitions to help understand this settlement.


For the purposes of this document, the term “defendants” is used to describe Encore, Midland, and Asset Acceptance whether individually or collectively.


“Legal Collection”

This includes any collection efforts made by either Encore or a third-party law firm acting on behalf of Encore.

In some states, Midland has its own internal lawyer that works for Midland that file these suits.

In Alabama, Midland does not have an internal lawyer to handle these suits. Instead, they use a few different law firms to file for them.

This definition does not include collection conducted as a result of a judgment


“Original Account-Level Documentation” or “OALD”

Encore has to provide original account-level documentation. However, the guidelines are pretty weak.

They only have to provide one of the following to meet the requirements:

  • any documentation that a creditor or servicer has provided to a Consumer about a Debt
  • complete transactional history of the debt
  • a copy of a judgment awarded to the Creditor on or before the effective date


“Time-barred debt”

This is a debt that is beyond the Statute of Limitations to sue. This time limit will vary depending on the state and the type of debt.


What the CFPB is doing

Think of it this way: The CFPB caught the bank robber (Midland) in 2015 and sued them for breaking the law.

Now, they have caught Midland breaking the law in 2020. The bank robber is robbing banks again. 

And here’s the settlement they propose – promise that for 5 years, you won’t rob any more banks. 

This sounds a little ridiculous, right? 

They have already shown that they continue to break the rules.

The requirements in the settlement are nothing special. They are the things Encore was supposed to be doing all along. 


No initiation of a legal collection lawsuit unless they have one of the following:


At a minimum, OALD for initiating a collection lawsuit must include the following. 

“The last four digits of the account number associated with the Debt at the time of Charge-off; and the claimed amount, prior to any post Charge-off payments (unless the claimed amount is higher than the Charge-off balanace, in which case the Defendants must possess (i) Original Account-Level Documentation reflecting the Charge-off balance and (ii) and explanation of how the claimed amount was calculated and why such an increase is authorized by the agreement creating the Debt or permitted by law.”

If suing under breach of contract, they have to be able to produce the contractual terms and conditions.

This part is important. If Midland is agreeing to this and you’re fighting them in court, and they are suing you for breach of contract, but they do not have the terms and conditions of your contract.

A credit card agreement is just a contract. This is how we know what the interest charge is, what the late fee is, and what the grace period is.

According to this settlement, they must have those contractual terms and conditions applicable to the debt. 

We’ve had these companies come in and sue us and try to provide terms and conditions from 2020.

But half the debt they are suing for was supposedly incurred in 2017.

What are the 2017 terms and conditions?

The collection lawyer will say, they don’t know what they are and they don’t have them. But they are pretty sure that the terms and conditions from 2020 are pretty much the same. 

Being “pretty sure” that they are “pretty much the same” is not the standard in court.

They need to show what the actual terms and conditions are. 

I believe this should always be the case, but now we have Midland agreeing to this to back it up. 

A chronological listing of the names of all prior owners of the debt

This would include a complete listing of owners of the debt from the creditor at the time of Charge-off. 

This document would also provide the dates when the debt was transferred to each company.

Either a document signed by the consumer OR an OALD reflecting purchase, payment, or use by the consumer

We very rarely ever see an actual document signed by the consumer as the basis for the debt. 

The second option, OALD reflecting purchase, payment, or any use by the consumer is not particularly helpful to the consumer. This is a very small requirement to meet. 

Midland is agreeing that they can’t engage in legal collection without providing certain information about the debt – the name of creditor, time of charge-off, etc. However, this is something that is basically already required under the law. 

This is not particularly noteworthy. Midland is just agreeing to what the law already is.

The law that they have been continually violating and will violate again. 

Upon the defendant’s receipt of a written request, the consumer will be provided with copies of the documentation referenced earlier.

Encore must inform the consumer that they will provide this within 30 days at no cost, but they are only required to do this once per year. 

Collecting on time-barred debts

According to the proposed settlement, for 5 years after the effective date, Encore will not collect or attempt to collect any time-barred debt through litigation or arbitration.


But this doesn’t change anything. You could already sue them for this without this agreement because it is a violation of the law

This is like saying that you agree to not drive 130 mph in a 30 mph zone.

You aren’t supposed to do that in the first place, whether you agreed to it or not. 

If they are collecting on a time-barred debt without litigation they are required to provide certain disclosures.

They have to inform you that the law places limitations on how long they can sue or credit report on the debt.

They must tell you that they cannot sue you or report payment or nonpayment of the debt to a credit bureau. 

Even if the debt is only time-barred but still within the credit reporting window, they must still tell you that they will not sue you

If you speak with them by phone, they only have to disclose once every thirty days. 

They also can’t do anything that takes away from these statements.

For example, they can’t tell you they won’t sue you and then say “but you know, we can trash your credit.”

The Payment:

In the proposed settlement, Encore will be paying $78,000 which will go to consumers.

They are also paying $15 million to the CFPB. 

This is only a drop in the bucket compared to the staggering amounts of money they are bringing in during the pandemic

Why is this settlement so unimpressive?

I think this could be due to a few possibilities. 

Maybe the CFPB had a great case and folded easily. 

Or, they might have realized that they really did not have the evidence needed for this case against Encore, Midland, and Asset Acceptance.

This happens from time to time, and you must take what you can get. 

I don’t know for sure which one it is. This is settlement arrived pretty quickly, only 5 weeks after the lawsuit was filed. 

Ultimately, the judge still has to make a decision on this, but I suspect he would enter this judgment and the case will be over. 

Despite this lawsuit, collection companies will continue to break the law.

Know your rights when dealing with these companies.

Take action to protect yourself. 

If you live in Alabama and you have any questions, feel free to get in touch with us.

We would be glad to help you in any way we can.

You can reach us by phone at 1-205-879-2447, or you can fill out a contact form and we will get in touch with you quickly. 

Have a great day!

-John Watts

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