A $5.2 million settlement that would have resolved claims that Encore Capital Group Inc used false affidavits to collect debts from 1.44 million consumers was voided by a federal appeals court, according to Reuters.
The ruling came from the 6th U.S. Circuit Court of Appeals in Cincinnati and it noted that U.S. District Judge David Katz abused his discretion in August 2011. This is when he approved the settlement with Encore and the Midland Funding and Midland Credit Management units. He said the settlement was “fair, reasonable and adequate.”
The claims made against the company said that Midland employees used false or ‘robo-signed’ affidavits to acquire consumer debt. They were accused of signing anywhere from 200 to 400 computer-generated affidavits per day without knowing the contents.
Circuit Judge R. Guy Cole, writing for the panel of three judges on the 6th Circuit Panel, said the settlement was “perfunctory at best.” He noted that the injunction did not prohibit use of false affidavits and that Midland was “free to resume its predatory practices should it choose to do so.”
“We’re delighted with the opinion,” Ian Lyngklip, who argued the appeal on behalf of eight class members, said in a phone interview.
“It signals that federal courts are not going to allow class action settlements that sacrifice significant rights of class members,” he continued. “The 6th Circuit has opened the door to all the victims of Midland’s practice of filing false affidavits to seek to throw out debt collection judgments against them.”
The general counsel for Encore, Greg Call, said, “Throughout this process, the validity of the underlying debt and the consumer’s financial obligation to repay it have never been called into question.”
Under the settlement, some 133,000 class members filed claims. Of those people, 4,262 opted out and 61 objected. In 2012, Encore invested $562.3 million to purchase accounts with a value of $18.5 billion.