March 30, 2011
Minnesota accuses Encore Capital of robo-signing
Minnesota's attorney general accused Encore Capital Group Inc of cutting corners by filing "robo-signed" affidavits in debt collection lawsuits, the same practice for which banks have come under fire in home foreclosures.
Attorney General Lori Swanson accused Encore of fraud for filing false affidavits to collect consumer debt that was not owed or had been already paid off.
Encore is one of the largest U.S. debt collection companies, and often buys its debt from credit card companies.
The allegations follow an Ohio federal judge's preliminary approval on March 11 of a $5.2 million class-action settlement of similar claims against Encore's Midland Funding LLC unit.
Encore spokesman Mike Huckman had no immediate comment.
Robo-signing is a term coined to describe employees signing litigation documents without reviewing their contents. All 50 state attorneys general are investigating robo-signing and other practices by banks in the mortgage industry.
Swanson said similar practices pervade in debt collection.
"People are getting hounded by debt buyers for money they don't owe," Ben Wogsland, a spokesman for Swanson, said in a telephone interview. "Midland is treating people as though they are guilty until proven innocent."
Wogsland said the attorney general is investigating about a half-dozen other companies that buy debt.
San Diego-based Encore had through year-end invested $1.8 billion to buy 33 million accounts with a face value of $54.7 billion, or about 3 cents on the dollar, according to its annual report.
Swanson said Encore pursued many of its lawsuits improperly, citing sworn testimony that "numerous" employees had signed up to 400 affidavits a day without reading or verifying the accuracy of their contents.
She said Encore often targeted consumers who had no legal representation, or did not know they had any alleged debt.
"The company put its thumb on the scale of justice to unfairly tilt the collection process in its favor," Swanson said in a statement.
Swanson wants the Ohio court to clarify that the proposed class-action settlement does not bar government agencies from pursuing similar litigation. She is seeking to file her lawsuit in a Minnesota state court, Wogsland said.
The Ohio case is Brent v. Midland Funding LLC, U.S. District Court, Northern District of Ohio, No. 08-01434.
For Brent: Dennis Murray and Donna Evans of Murray & Murray.
For Midland: Theodore Seitz of Dykema Gossett.
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