In Junk Justice, I wrote about statistical outcomes of lawsuits filed by large debt buyers in Maryland. Based on my study, the years 2009-2011 had a combined total of over 121,000 cases filed by the sample group of large debt buyers in the District Court of Maryland. But now, the picture is different. We see a consolidation in the industry, and a drop in the number of filings.
Defective Debt Buyer Affidavits and the Lack of Data Integrity: Other People’s Records (“OPR”) are Not “Business Records” of Midland Funding
Barry Stimpson, like so many other Americans, was sued by Midland Funding, LLC. Midland claimed that it had bought a debt Stimpson owed to Capital One. Midland tried to prove that Stimpson owned it money with three affidavits. The District Court of Canyon County, Idaho, found that these affidavits were insufficient. The court’s decision merits reading for its clear and full analysis of the law of evidence as applied to debt buyer affidavits.
Imagine receiving a phone call that 25% of your wages are going to be garnished because of a credit card account opened 14 years earlier that was never paid off. Making things worse, you know you didn’t have a credit card from the bank in question at that time, so it can’t possibly be your debt. This should be an easily remedied error, but not if a court has already granted a default judgment against you, making you responsible for paying back money that you didn’t owe and didn’t find out about until it was too late.
A new National Consumer Law Center (NCLC) report argues that the Consumer Financial Protection Bureau (CFPB) should use its power to ban the collection of statute-barred debts:
In light of the inherent unfairness, deceptiveness and abusiveness that occur when collectors pursue time-barred debt and the inability of disclosures to adequately protect consumers, the CFPB should ban all efforts to collect out-of-statute debt—whether by litigation or other means.
“Pennies on the dollar” is perhaps an overstatement. According to Paragraph 4 of a January 6, 2015 settlement agreement reached with the New York State Attorney General, Encore Capital Group, Inc. (which is publicly traded and is the parent of junk debt buyer Midland Funding, LLC) “paid approximately $1.2 billion to acquire portfolios, primarily charged-off credit card portfolios, with a face value aggregating $84.9 billion.” When you do the math (1.2 billion divided by 84.9 billion), that comes out to about 1.4 cents on the dollar — i.e. less than two pennies on the dollar.
As part of the settlement, Encore promises that it will stop suing to collect debts which are barred by the statute of limitations in New York. The full text of the settlement is Here.
Debt buyers routinely sue consumers after the statute of limitations has run, both in Maryland and around the country. The FTC’s study of the large debt buyers found that 30% of debts purchased were at least three years old and therefore were likely beyond the statute of limitations in Maryland and some other states.
Encore entities filed law suits and obtained thousands of judgments on time barred debts:
It is well known that some debt collection attorneys mass produce lawsuits and do so without properly reviewing their own documents. As one former collection attorney, quoted in Jake Halpern’s Bad Paper, put it “[t]here’s no way that you could effectively double-check all that stuff.” Despite slipshod review of the case files, the collection attorney’s firm netted “astronomical” profits.
However, the New York courts are not happy with this sort of behavior and Midland Funding LLC v. Austinnam is an excellent expression of their displeasure. In Austinnam, the court imposed a fine as a sanction on both the plaintiff, Midland Funding LLC, and its attorneys.