On September 9, 2015, the Consumer Financial Protection Bureau entered into a Consent Order with Encore Capital Group as well the companies it owns –  Midland Funding, Midland Credit Management, and Asset Acceptance Capital – to refund millions to consumers who were subjected to illegal debt collection tactics by the companies.

According to the Consent Order, Encore Capital Group will pay up to $42 million in refunds and stop collection on $125 million in debt. It will also pay a $10 million penalty to the bureau’s Civil Penalty Fund.

Those are big numbers, to be sure. But the Consent Order is a treasure trove of information, giving us a deep look into the inner workings of one of America’s largest debt buying outfits.

The information is horrifying for anyone who’s been sued for a past due debt, and shocking for someone who’s never had to deal with Midland Funding or any of its related companies. But for lawyers who defend debt collection lawsuits, the Consent Order verifies what we’ve been saying all along.

Here’s what we learned:

  1. Midland Funding, Midland Credit Management and Asset Acceptance are wholly-owned subsidiaries of Encore Capital and share common officers and directors with Encore. Midland Funding and Midland Credit Management operate in concert with one another, and under the direct supervision of Encore Capital. Asset Acceptance was purchased by Encore in June 2013.
  2. From 2009 – 2015 Encore (which includes all of the other companies) collected over $5 billion in consumer debt and had net income of more than $384 million.
  3. From 2009 – 2015, Encore paid about $4 billion for approximately 60 million charged-off consumer debts with a total face value of $128 billion – in other words, Encore pays about $0.03 for every $1 of debt it buys.
  4. Encore has call centers in the United States but also in India and Costa Rica.
  5. The vast majority of debt collection lawsuits filed by Midland Funding, Midland Credit Management, Asset Acceptance, and Encore go unanswered by consumers and result in default judgments. The Encore companies have a business that is built on the knowledge that most people do nothing when they are served with a debt collection lawsuit,
  6. When Encore buys a debt it received an electronic data file with a consumer’s name, address, Social Security number, and information about the debt. Encore, Midland Funding, Midland Credit Management and Asset Acceptance do not receive any actual documentation about the debts they buy.
  7. Many of the purchase agreements state that the original creditor will provide documentation to prove the debt only if it’s available – and in some cases the agreements state that no documentation is available. Encore and its subsidiaries buy past due accounts in spite of the fact that no proof of many of the debts exist.
  8. When one of the Encore companies buys a debt, the original creditor doesn’t verify the amount due or even whether the debt is legally enforceable. Encore, Midland Funding, Midland Credit Management and Asset Acceptance buy debts that may be past the applicable statute of limitations and the balance claimed may be incorrect.
  9. When Encore buys a debt it says that it independently verifies all of the information in the date file, but it does not do so. The only investigation taken by Encore prior to a debt portfolio purchase has been to review the data file for information that is clearly incorrect, such as a default date listed as being prior to the date the account was opened.
  10. Encore continues to buy debts from sellers even if that seller has previously provided inaccurate information about debts. Encore knows that it is buying debts that have bad information, yet it continues to do so.
  11. In spite of the fact that the Fair Debt Collection Practices Act and Fair Credit Report Act give people the right to dispute or request verification of a debt, Encore’s policy has been to ignore those disputes unless they were made in writing within 45 days after Encore sends out an initial debt collection letter. Encore has been breaking the debt collection and credit reporting laws in spite of the fact that it is required to follow those laws.
  12. Encore has filed hundreds of thousands of debt collection lawsuits but hasn’t given its lawyers access to information needed to prove the cases. Encore’s lawyers have routinely filed lawsuits against people without verifying any information about the debt. In fact, Encore has prohibited law firms hired to sue consumers from contacting previous owners of the debt for account documentation, and has discouraged those firms from requesting documents from Encore unless it was absolutely necessary.
  13. Encore, Midland Funding, Midland Credit Management and Asset Acceptance don’t take a case to trial. When consumers have contested Encore’s claims and Encore lacked documentations necessary to obtain a judgment, Encore has instructed its lawyers to make one final attempt to convince the consumer to settle before dismissing the claim.

The Consent Order against Encore Capital is 63 pages, and reveals a debt buying operation that uses the court system as a way to pry billions of dollars from the hands of people who not only can’t afford it, but may not even be obligated to pay. Don’t take my word for it – read the document for yourself (and prepare to be appalled).

Though I applaud the government’s actions, it’s also useful to repeat that Encore and its related companies had $384 million in net income (that’s the amount of money the companies made after paying all expenses, salaries, and overhead) but is paying only $52 million. That leaves $332 million in Encore’s coffers.

With that slap on the wrist, do you seriously think Encore and the gang at Midland Funding are going to stop violating the laws and filing debt collection lawsuits without proof?

I wouldn’t bet on it. And that’s the major reason why you need to stand up for your rights if you’re ever sued for a past due debt.