Minnesota Attorney General Lori Swanson's office on Thursday sued collection industry giant Encore Capital Group Inc. for allegedly using fraudulent "robo-signed" affidavits in collection cases.

The complaint states that employees of Encore's Midland Funding LLC and Midland Credit Management Inc. units testified under oath to having signed up to 400 affidavits a day without reading them.

Encore, based in San Diego, buys discounted debt from credit card companies and collects on the accounts. At year-end, Encore had invested about $1.76 billion to buy 33 million accounts with a face value of $54.7 billion, or about 3 cents on the dollar.

Swanson stated that the Midland units often forced "individual citizens to prove they do not owe money instead of themselves substantiating that the citizens actually owe the money." The lawsuit seeks a halt to improper practices, and fines of $25,000 per violation and for contempt of court.

Swanson was allowed to pursue the legal action after Ohio Federal District Court Judge David Katz issued an order saying that a $5.2 million class action settlement in that jurisdiction did not prevent Minnesota's legal action.

The lawsuit further alleges that Midland "aggressively filed thousands of lawsuits against individual citizens for collection of old, purchased debt, often supporting those lawsuits with robo-signed affidavits generated at its St. Cloud Offices."

"Midland has perverted the justice system by filing robo-signed affidavits in court and hounding citizens for debt they don't owe," says Swanson.

Encore Chief Executive Brandon Black, in an e-mail statement, said the company reworked its affidavit process in 2009. He believes its practices are "legally sound," and says the firm will work with Swanson to resolve the matter. He added that "because 95% of consumers ignore letters sent by the company, the legal channel is often the only remaining option."

Encore initially responded to the allegations of wrongdoing in March (see story).

All 50 states are investigating robo-signing and other improper practices by banks, specifically within the mortgage industry.

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