FTC Submits Opinion on Debt Buyer Class Action Lawsuit

The Federal Trade Commission has decided to throw its $0.02-worth into the ongoing drama surrounding a proposed settlement between Encore Capital Group and a group of consumers participating in a class action suit against the San Diego-based debt buyer.

The class action settlement was preliminarily approved by the Court, the plaintiffs, and Encore (the defendants) on March 11, 2011. In part, it reads:

“Under the proposed settlement, class members who do not opt out: release and forever discharge Encore Capital Group, Inc. [and its affiliates, agents, and representatives] (“the Released Parties”) from all causes of action, suits, claims and demands, whatsoever, known or unknown, in law or in equity, based on state or federal law, which the class now has, ever had or hereafter may have against the Released Parties, arising out of or relating to the Released Parties’ use of affidavits in debt collection lawsuits.”

The FTC, however, isn’t having it.

In both a press release and an amicus brief^* filed on June 21, 2011, the FTC is expressing concern that the settlement “may deprive over a million consumers across the nation of their existing rights to challenge improper judgments entered against them, to defend themselves in ongoing debt collection actions, and to vindicate violations of collections laws in state and federal court by Midland Funding, LLC, Midland Credit Management, Inc., and Encore Capital Group, Inc. (collectively “Defendants”) and their agents.”

Encore addressed many of the FTC’s concerns in a statement back in March: “Our process accurately [reflects] the individual who incurred the debt, the amount owed, and our ownership of the account. The company has also invested millions of dollars in sophisticated technology and analytics to ensure that we pursue litigation only when we believe the consumer has the financial ability to repay the debt. Nevertheless, our company took the court’s concerns very seriously and we transformed our processes in this key area. As a result, we believe Encore Capital has been defining the industry’s best practices.”

The biggest concern that FTC has, though, is the amount of the payoff and the potential harm to the plaintiffs: “Class members will have to give up too much in exchange for too little,” receiving a pay-out capped at $10. In exchange, the FTC says, plaintiffs would “surrender their rights under the FDCPA and state laws to challenge Midland’s actions related to the company’s use of affidavits in debt collection lawsuits.”

Encore Capital Group naturally disagrees with the FTC’s disagreeing with the settlement. In a statement provided to insideARM.com by Brandon Black, Encore Capital’s Chief Executive Officer, the company said:

“Encore Capital Group and its wholly owned subsidiaries, Midland Credit Management, Inc. and Midland Funding, LLC, strongly disagree with the arguments contained in an amicus brief recently filed by the Federal Trade Commission and the implication the company may have intentionally pursued collection efforts against individuals who did not have debt obligations to fulfill.

“Encore believes the settlement reached in this case is fair, reasonable and adequate. The company is confident in the integrity and accuracy of its processes and in the validity of the underlying debts at issue. Encore is optimistic that the judge, after examining all of the facts and evidence, will support the company’s position and formally approve the settlement.”

^* Amicus brief: A court filing from someone (an individual or group) not directly involved in the case. It usually takes the form of unsolicited testimony, and can be used by the court to help it reach a decision. Whether to allow an amicus brief to be allowed into the record is at the discretion of the court. The full name, amicus curiae is legal Latin for “friend of the court.”