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Brief challenges debt buyers’ abuse of consumers

August 9, 2016: Inaccurate information. Falsified legal documents. Abuse of consumers. Strategic use of lawsuits and forced arbitration. Sounds like a recipe for an ethical business, no? The debt buyer industry consistently uses such tactics, seemingly without regard for whether they’re reaching the right people or giving them a fair chance to defend themselves. In an August amicus brief, the Public Justice Center and allies called out these unsavory practices and urged the courts to make it possible for consumers to hold debt buyers accountable for these practices.

Debt buyers profit from collecting debts based on debt records that are frequently riddled with errors. As a consequence, debt buyers often try to collect debts from the wrong people, send notice to old addresses, collect the wrong amount of debt or even try to collect the same debt twice. Despite the documented inaccuracy of purchased, charged-off debt records, debt buyers robo-sign affidavits verifying the debt records’ accuracy without actually reviewing the records themselves. They then file lawsuits against individual consumers on the assumption that the consumer won’t show up to challenge the accuracy of the affidavit (pretty likely if the address on file is wrong or out-of-date) and the court will issue a default judgment based on the robo-signed affidavit. Many consumers only find out about lawsuits against them when their wages or bank accounts are garnished. And when a consumer does find out about the lawsuit and decides to fight, debt buyers typically move the dispute out of the courts and into expensive, private arbitration in an attempt to gain the upper hand.

Midland Funding is one such debt buyer. The business had raked in considerable profits from securing questionable debt judgments from Maryland consumers without a license. But unlike many others, they got caught, and the judgments were later deemed invalid and void by a Maryland court. Seeking justice for himself and others affected by Midland Funding’s illegal activities, Clifford Cain filed a class action lawsuit to force Midland Funding to give up the profits made from the invalid judgments. Midland Funding responded by pushing his case into arbitration in an effort to protect itself from a class action challenge.

On August 9, 2016, the Public Justice Center, joined by Civil Justice, the Maryland Consumer Rights Coalition, and the Maryland Cash Campaign, filed an amicus brief in support of a Petition for a Writ of Certiorari in Clifford Cain, Jr. v. Midland Funding. The petition, filed by Public Justice in Washington, D.C. (unaffiliated with the Public Justice Center), argued that Midland Funding waived its right to individually arbitrate Mr. Cain’s class action when it chose to file its collection suits in court and only moved to arbitrate after the decision deeming the judgments invalid came down. The amicus brief, co-authored by Public Justice Center Murnaghan Fellow Tassity Johnson and summer law student intern Rory Coursey, provides an overview of the abusive business practices of debt buyers like Midland Funding. The brief asserts that the debt buyer profit model relies on its ability to secure default judgments against consumers based solely on minimal, unreliable information and its use of mandatory arbitration bans that prevent consumers from efficiently challenging such judgments. The brief argues that a debt buyer that strategically forum-shops, as Midland Funding did here, has waived its right to arbitrate. We await the decision of the Court of Appeals on whether it will agree to review the case.

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