A federal judge in Michigan has dismissed a proposed class-action lawsuit accusing debt buyer Encore Capital Group of suing consumers over old debts that were no longer legally enforceable.

U.S. District Judge Linda Parker ruled that the case instead must be decided in arbitration.

The decision ends a 2015 lawsuit seeking damages for violations of the Fair Debt Collection Practices Act, which prohibits certain practices including time-barred lawsuits to collect debt. Details on the specifics of the case weren't immediately available.

Encore Capital, based in San Diego, agreed in January 2015 to settle claims in New York that it used improper collection strategies, including obtaining judgments against consumers for debts that were too old to collect. The company agreed to pay a $675,000 penalty and vacate more than 4,500 court judgments against borrowers New York totaling nearly $18 million.

Encore Capital buys unpaid debts such as credit card debts from original creditors or other debt buyers and then uses subsidiaries, including Midland Credit Management, to collect those debts.

In May 2014, New York Attorney General Eric Schneiderman's office reached agreements with other large debt buyers including Portfolio Recovery Associates LLC (PRA Group) and Sherman Financial Group LLC. Under those deals, the companies agreed to nullify judgments, valued at more than $16 million, against New York residents.

An investigation revealed that the debt buyers had failed for several years to ensure their claims were filed within appropriate time limits under state law, which requires actions be brought either under New York’s six-year limit or the limit in the state where the original creditor resides, whichever is shorter.



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