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Encore Capital Group and Midland Credit Management, Inc. -- When A Consumer Bill of Rights Doesn't Mean What It Says


In 2011 Encore Capital Group rolled out a "Consumer Bill of Rights" that was touted as an effort to " set the industry standard for consumer conduct." Per the linked press release, Encore is the nation's largest publically-traded debt buyer. It purchases debts that have been charged off by banks -- these debts are generally credit card debts.

The Consumer Bill of Rights is supposed to be the document that guides the conduct of Encore's collectors. It also claims to create several levels of account information validation. However, this validation is based moreso on finding the consumer and collecting money (or determining that the consumer is uncollectable), not on making sure that the debt is properly documented.

The only mention of proper documentation comes in Article 5 of the document:

We will not resell accounts to third parties in the ordinary course of our business. In the future, if we have an occasional instance when we do resell accounts, we will only do so when we can provide the purchaser with documentation evidencing the amount owed on the account and clear title of ownership.

The majority of what is promised in the document is what Encore should already be doing -- making sure that its debt collectors comply with the law. The document suddenly veers towards being laughable in Article 6 -- Encore's commitment to the "fair and reasonable use of litigation."

Some of the company's commitments fly in the face of what is common practice in debt collector/debt buyer lawsuits. For example, "we will not pursue litigation . . . on accounts where we are not the rightful owner, and we will require our attorneys and law firms to provide proof of such ownership when requested by a court."

This clause contains some fantastic weasel language. "Rightful owner" is a pretty loaded concept -- these kinds of debts are really a bundle of rights. In Illinois, a credit card account involves both legal and equitable interests in the credit card account. The burden of proof for a debt buyer to be the rightful owner of an account is different than the burden of proof for a debt collector. Whether an entity is the "rightful" owner of a debt may vary from state-to-state and case-to-case. In any event, there is enough grey area that this promise means very little.

Additionally, any promises made in Article 6 with regard to attorney conduct are also empty promises. Encore cannot truly control the attorneys that it hires -- it can merely stop working with a firm that does not comply with its wishes. Moreover, some of the promises made by Encore in 2011 were called into question in 2012.

In particular, the portion of Article 6 that addresses the robo-signing of affidavits is not being followed according to the Attorney General of West Virginia. In March of 2012, West Virginia sued Encore's subsidiary corporations alleging that the company frequently files lawsuits based on inaccurate or unverified affidavits. If proven to be true, then it would demonstrate that Encore is not following the rules that it established for itself.

It would also expose another bit of weasel language in that promise -- "our authorized representatives will read, understand, and fully verify document contents as appropriate to ensure accuracy." There is nothing in this promise that addresses the accuracy of the account records used to prepare hte affidavit. An authorized representative could read and understand the contents of a document -- that person could even verify the data against the information in the debt buyer's possession -- but there is never a verification of the underlying data. This is the heart of the complaints against the debt buyers -- they cannot prove that a debt is owed or that they are the true owner of that debt.

This Consumer Bill of Rights is a great idea -- debt collectors and debt buyers should operate within the law and respect the rights of consumers. Unfortunately, in my experience, the reality is that the debt buying industry is inherently flawed -- debt buyers simply cannot prove ownership of the debts that they purchase. All of the ethical behavior in the world cannot redeem that basic flaw in the system.