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Vassalle v. Midland Funding

AARP Urges Federal Appeals Court to Reject Proposed Unfair Debt Collection Class Action Settlement

    

AARP’s friend-of-the-court brief supports a request to reject the proposed settlement of an unfair debt collection class action lawsuit, arguing it does not protect class members from unfair debt collection.

Background

Encore/Midland, one of the nation’s largest debt collectors, was sued in Ohio, California, Virginia, Minnesota and Michigan, charged with allegedly violating state and federal consumer protection laws by using false affidavits (a practice known as “robo signing”) to obtain judgments in court. The practice in question involves collectors filing mass-produced affidavits — sworn documents attesting to personally known facts, on which courts rely for their truthfulness. Robo-signing makes the affidavits completely untrustworthy because in reality, no one checks to make sure they are accurate accounts of the debt or the business practices.

The lawsuits from numerous states were stayed while the Ohio plaintiffs — the first to file — and Encore/Midland attempted to reach a settlement. The proposed settlement covers a nationwide class, provides a monetary remedy of $5.5 million in damages (amounting to approximately $10 per class member) and releases Encore/Midland from all legal challenges to the judgments entered in reliance on false affidavits. Consumers who would be forced to comply with the terms of the settlement, including those who filed separate state lawsuits, objected to the settlement claiming the release is not fair. Many class members would like to challenge the validity of the judgments entered against them based upon false affidavits under their respective state laws.

AARP’s friend-of-the-court brief, filed by attorneys with AARP Foundation Litigation, urges the court to reject the settlement on the grounds that it is an inadequate remedy that will prevent class members from challenging any judgment even if state law would permit a challenge. As a result of this proposed settlement, innocent consumers sued to collect debts that they already paid off or never even incurred, or that they did not know about because of improper service, will not be able to challenge the judgments.

The brief details the widespread robo-signing abuses by debt buyers, which have transformed the collection industry to collect on junk debt. Debt buyers collectively bring millions of collection lawsuits, overwhelming state courts with ill-prepared lawsuits based on false affidavits on debts that the collector cannot prove are owed. Most judgments obtained by debt buyers are entered by default based on such false affidavits. The brief also points out that Encore/Midland obtains through this settlement what it has heretofore been unable to obtain through lobbying: a significant weakening of the laws protecting consumers from unfair and abusive debt collection.

What’s at Stake


Older people are particularly at risk of unfair and abusive debt collection practices because they often live on fixed incomes, face unexpected expenses (such as health care costs) and lack adequate resources to preserve their independence and financial security, or even to provide the basic necessities of life.  Moreover, older people may have difficulty remembering whether they paid a very old debt and may no longer have the documents to prove whether they paid it. Debt buyers take advantage of the lack of information available about junk debt and people’s fear of courts to obtain undeserved judgments. The nationwide settlement, if ultimately approved, will prevent people from challenging those judgments.

Case Status

Vassalle v. Midland Funding is before the U.S. Court of Appeals for the 6th Circuit.


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Our legal advocacy initiatives  - conducted by AARP Foundation Litigation (AFL) - reflect more than 15 years of work in federal and state courts across the country. Through our efforts, we support the Foundation’s four priority areas: Hunger, Income, Housing and Isolation, and ensure that those 50 and older have a voice in the laws and policies that affect their daily lives.