Texas Attorney General Greg Abbott on Friday charged debt buyer Encore Capital Group with robo-signing and falsifying affidavits, attempting to collect debts based on incomplete and inaccurate information and employing unlawful and deceptive collection tactics.
The enforcement action states that San Diego-based Encore and its subsidiaries – Midland Funding LLC and Midland Credit Management Inc. - committed multiple violations of Texas collection laws and the Texas Finance Code.
Midland Funding's collection letters contained "very little information about the debt they were attempting to collect, provided no supporting documentation and included no proof that they actually acquired the debt from the original creditor," according to investigators. Court documents filed by investigators indicate the defendants also sometimes targeted the wrong individuals for collection and attempted to collect debts that had been fully or partially paid.
The investigation revealed the defendants employed “robo-signers” to supply the legally required verification. Court documents indicate the robo-signers routinely signed more than 300 affidavits per day and did not actually review the underlying credit agreements or the alleged debtor’s payment history.
In sworn testimony provided to investigators, the attorney general's office revealed, the robo-signers said they also had no personal knowledge of the original debt or the defendant’s acquisition of the debt portfolios – which was contrary to the information contained in sworn affidavits that defendants filed with the courts.
Because the court presumed the falsified affidavits were truthful, judges relied upon them to issue judgments against debtors. As a result, the attorney general's office charged the defendants with defrauding the Texas judicial system by knowingly submitting false affidavits to state courts.
The enforcement action seeks to establish a restitution trust fund for money that the defendants unlawfully coerced from Texans. The attorney general's office also seeks civil penalties of up to $20,000 per violation of the Texas Deceptive Trade Practices Act, as well as penalties that apply under the Texas Finance Code for third-party debt collectors who violate state law.
Encore officials late Friday released a statement reacting to the Texas investigation.
"The Texas complaint largely restates allegations raised in a 2008 lawsuit, which alleged that affidavits filed in debt collection lawsuits were defective because the person who signed the affidavits lacked personal knowledge. Contrary to the Texas Attorney General's suggestion, the alleged defects in the affidavits never resulted in judgments against people who did not owe the debts." (Click here) for the full statement.
Last month, 38 state attorneys general opposed a proposed class-action settlement related to Midland Funding's alleged robo-signed affidavits in collection cases (see story).