Midland Funding is a company that buys old credit card debts at a steep discount, often without proper documentation. The company tries to collect by hiring collection agencies; if that doesn’t work, Midland will hire a lawyer to file a collection lawsuit.
If you go past due on a credit card debt, it’s going to be sold to another company. That’s how credit card companies make their money – by selling old debts that they can’t collect on their own.
The companies who buy old debts usually pay far less than face value for the account, so your $5,000 debt may be sold for as little as $500 depending on the exact nature of the account. Once the deal is done, the credit card company is out of the picture and only the debt buyer has the legal right to receive payment.
One of the major players in the debt buyer arena is Midland Funding, a unit of Encore Capital Group. Encore Capital, based in San Diego, is the largest debt buyer in the nation, buying enormous portfolios of charged-off debts each year in the hopes that it will be able to collect.
Midland Funding LLC is one of the nation’s biggest buyers of unpaid debt. Midland Funding LLC purchases accounts with an unpaid balance where consumers have gone at least 180 days without making a payment, or paid less than the minimum monthly payment.
Midland Funding LLC works with its affiliate, Midland Credit Management (MCM), to service accounts.
So there you have it – Midland Funding LLC buys the debts and hires Midland Credit Management to try to collect from you.
Midland Buys Debts, But What Is It REALLY Buying?
The problem isn’t that debts are sold to other companies, or that the new company hires someone else to collect from you. If the original creditor can’t get you to pay the debt, it makes sense that the lender would want to sell the account in an effort to minimize its losses. The new buyer understandably doesn’t want to pay full price for the account, which is why these debts are sold at such steep discounts.
When a debt gets sold, there are certain documents that should be transferred from the seller to the buyer. Such items include:
- The original agreement, including the terms and conditions under which the original lender agreed to extend credit;
- copies of statements showing how the borrower incurred the debt, including the dates of transactions;
- A complete accounting that shows how interest and other charges were calculated, as well as how payments were apportioned;
- Proof that the buyer actually purchased this specific account; and
- The terms and conditions of the sale of the account.
Midland Funding, however, buys billions of dollars worth of debt each year. To cut its costs, Midland wants to pay as little as possible for each account. The credit card companies, however, want to get paid as much as possible so that they take less of a loss on their unpaid accounts.
To compromise, Midland Funding (as well as just about any other debt buyer out there) buys nothing more than an electronic file of names, addresses, and amounts due. The company doesn’t ordinarily receive copies of agreements, statements, or anything else that would prove the amount or ownership of the debt.
The agreements covering these transactions allow Midland Funding to get more information, but it’s going to cost them more money – as much as $50 per account. That may not sound like much of an investment, but when you consider that Midland Funding is buying tens of thousands of accounts you can easily see how it can add up and cut into their bottom line.
The Midland Funding Business Model
Midland Credit Management will usually try to collect on a debt once Midland Funding buys the account, hoping that the consumer will voluntarily make a payment. Some people will pay the debt, others won’t.
If you don’t pay the debt when Midland Credit Management comes calling, then Midland Funding will take back the account and send it to a law firm. In California Midland’s primary outside law firm is Hunt & Henriques, though sometimes they keep the account in-house and use one of their own attorneys.
That happens a lot – in fact, during November 2014 alone Midland Funding and Midland Credit Management filed 193 collection cases in Los Angeles Superior Court alone.
In the vast majority of those cases (well over 90% of the time, in fact), Midland Funding gets a judgment for the entire balance they claim to be due.
Why Midland Funding Gets Judgments So Often
Most of the time, when someone is sued by Midland or another debt buyer, they fail to defend the case or show up in court.
With no opposition to the lawsuit, the judge grants a judgment in Midland’s favor. Once that judgment is issued, Midland can collect through wage garnishment, bank account levy, and other tactics.
That judgment, in California at least, can be renewed indefinitely. And once the judgment is issued, it’s difficult to get it lifted.
Why Defending A Midland Funding Lawsuit Makes More Sense
As I said, Midland Funding isn’t getting much in the way of documentation when it buys old debts. For example, it doesn’t get copies of the credit card application or statements.
In fact, Midland doesn’t get much proof at all when it comes to the debts it buys. Just enough to figure out who to sue and how much to claim as an amount due.
If you defend the credit card lawsuit when Midland Funding decides to sue, there’s a pretty good chance you’ll either get a very good settlement or win the case entirely. Because in the absence of any proof of their ownership of the debt or the amount due, Midland’s case falls apart.
States Have Noticed Midland’s Shoddy Practices
I’m not the only one who’s noticed how shoddy Midland is when it comes to filing credit card lawsuits with little or no proof.
In January 2015, New York State Attorney General Eric Schneiderman sued Encore (Midland’s parent company) over shoddy practices and forced Encore to pay a $675,000 penalty and vacate more than 4,500 court judgments against borrowers.
In 2012 the West Virginia Attorney General sued Encore “for using false affidavits when obtaining default judgments against West Virginia consumers and for failing to include information required by law when suing a consumer in magistrate or circuit court for an alleged debt.”
In 2011, the Minnesota Attorney General launched an inquiry into an Ohio class action against Encore for debt collection abuses after filing a lawsuit against Encore.
If You’re Contacted Or Sued By Midland …
It’s not hard to see why it makes sense to defend any credit card lawsuit that’s brought against you by Midland Funding, Midland Credit Management, or Encore. The company has a long history of playing fast and loose with the debt collection process, and there’s no reason to expect that your case would be any different.
Defending the lawsuit gives you the chance to force Midland to prove up the case, including answering the following questions:
- are you responsible for payment of the account?
- does Midland rightfully own the debt they claim they own?
- is the amount they claim to be due actually accurate?
- has the lawsuit been filed within the appropriate statute of limitations for collection of a debt?
It’s about making sure that you pay the proper people the proper amount of money, and not one dime more.
About Jay S. Fleischman
Jay S. Fleischman is a student loan lawyer with 24 years of experience helping people with debt and credit problems. He has represented thousands of individuals and families in bankruptcy, as well as in federal and state courts. His practice is limited to to student loan issues.
Jay played a central role in developing the Student Loan Law Workshop, where he personally helped to train over 350 lawyers how to help people with student loan problems. He has spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. He is regularly sought out by national news outlets for his insights on student loans and consumer debt issues.
Jay practices law in New York and California, and advises consumers and attorneys nationwide.
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