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Debt buyers Encore Capital Group, Inc., Midland Funding LLC, Midland Credit Management, Inc., and Atlantic Credit and Finance, Inc., ("Midland companies") have entered into a  $12 million settlement with the Massachusetts Attorney General.  They will pay a $4.5 million fine, cease collection on $7.5 million in uncollected debts, and comply with various restrictions on their collection activities. 

The Attorney General alleged that the Midland companies dunned on timebarred debts without providing the disclosures required by 940 C.M.R. 7.07(24) for such debts.

The Attorney General also alleged that the Midland companies failed to comply with verification requirements under state law.  940 C.M.R 7.08(2) states that “it shall constitute an unfair or deceptive act or practice for a creditor to fail to provide to a debtor or an attorney for a debtor the following within five business days after the initial communication with a debtor in connection with the collection of a debt, unless the following information is contained in the initial communication or the debtor has paid the debt:  (a) The amount of the debt;  (b) The name of the creditor to whom the debt is owed; (c) A statement that unless the debtor, within 30 days after receipt of the notice, disputes the validity of the debt, or any portion thereof, the debt will be assumed to be valid by the creditor; and (d) A statement that if the debtor notifies the creditor in writing within 30 days after receipt of this notice that the debt, or any portion thereof is disputed, the creditor will obtain verification of the debt and provide the debtor, or an attorney for the debtor, additional materials described in 940 C.M.R 7.08(2).”

Under 940 C.M.R 7.08(2), if the debtor disputes the debt in writing, the person seeking to collect must provide (a) All documents, including electronic records or images, which bear the signature of the debtor and which concern the debt being collected;  (b) A ledger, account card, account statement copy, or similar record, whether paper or electronic, which reflects the date and amount of payments, credits, balances, and charges concerning the debt, including but not limited to interest, fees, charges or expenses incidental to the principal obligation which the creditor is expressly authorized to collect by the agreement creating the debt or permitted to collect by law; (c) The name and address of the original creditor, if different from the collecting creditor; and (d) A copy of any judgment against the debtor.”  All collection efforts must stop until the person seeking to collect “has made reasonable efforts to obtain the necessary information and provide this information to the debtor.”

The Massachusetts Attorney General alleged that the Midland companies did not provide the statement required under 940 C.M.R. 7.08 and did not obtain certain account level documentation when it acquired many of the debts, including documentation provided to the debtor by the prior owners of the debts, complete transactional histories of the debts, and copies of any final judgments awarded to the seller.  They also allegedly entered into agreements to purchase debts that did not require the seller to provide this account level documentation, and that limited the seller’s responsibility for the accuracy and validity of the debts.

Another allegation by the Attorney General was that the Midland companies failed to comply with 940 C.M.R. 7.04(l)(f), which prohibits a Debt Collector from initiating more than two telephone calls to a Debtor’s residence, cellular telephone, or other personal telephone in a seven-day period.  Outbound calls that do not reach a consumer, or where no message is left for the consumer, are included as “initiating” a communication with any debtor via telephone pursuant to 940 C.M.R. 7.04(f).  The Midland companies did not count “outgoing calls where its collectors did not reach a consumer, or decided not to leave a message on an answering machine” within its call frequency limits.

Finally, the Attorney General alleged that the Midland companies collected or attempted to collect against exempt income of the debtors.

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