Attorneys General are Against a Proposal

The attorneys general of thirty states of America are up in arms against a proposal pertaining to class-action settlement. If admitted this would make it tougher for the law enforcing officials of the state to control the debt collecting firms.

Last February an agreement was reached with Encore Capital Group, the largest debt collecting firm of the country by revenue count. $5.7 million would be paid to settle all class-action legal suits brought against it for violating the state or federal laws by submitting false affidavits.

District Judge David A. Katz of Toledo (Ohio) gave a ruling in 2009 that the employees of Encore made use of “false and misleading” affidavits for the purpose of collecting credit-card debts. As a segment of this case, one employee gave the testimony while deposing that he had inked as many as 200 to 400 documents per day; very few of these were reviewed to see if the facts were in order.

In this month the attorneys general of the 38 states requested the judge to dismiss the suggested settlement. Their argument is that giving the nod to the deal would give a fillip to the debt collecting industry to evade enforcement actions of the officials of the state.

The attorneys general say that Encore would make use of the settlement citing it as precedent all through the country. Then other charges of defective affidavits would be cancelled because of this deal in Ohio. Some think that the result could give the lead to the future legal strategy of the debt collecting industry for protecting itself from future actions by enforcing officials.

Howard Beales who had been the lead personage in Bureau of Consumer Protection of the Federal Trade Commission from 2001 till 2004, opined that the deal would hinder the efforts of the enforcement officials of the state by “making it harder for them to argue that there’s anything left to go after that hasn’t been addressed by the settlement”.

The recession has seen an increase in soured debts and this has led to legal suits piling up against borrowers. But some of the state as well as federal judges together with the regulators allege that the debt collecting agencies have used false documents in courts to win their point. Because of defective paperwork some borrowers have even landed up in jail.