Midland Funding is a company that buys old credit card debts at a steep discount, often without proper documentation. The company tries to collect by hiring collection agencies; if that doesn’t work, Midland will hire a lawyer to file a collection lawsuit. By understanding how this company operates and its business practices, you can better protect yourself and your finances.
If you go past due on a credit card debt, the lender will either hire a debt collector or sell the debt to another company.
The companies who buy old debts usually pay less than the balance due and hope to collect enough to make a profit. Once the credit card account is sold, the credit card company is out of the picture, and only the debt buyer has the legal right to receive payment.
One of the major players in the debt buyer arena is Midland Funding, a unit of Encore Capital Group. Encore Capital, based in San Diego, is the largest debt buyer in the nation, buying enormous portfolios of charged-off debts each year in the hopes that it will be able to collect.
This is a profitable business model – in fact, Encore Capital Group had revenues of $1.4 billion in 2022. Ryan B. Bell, the President of Midland Credit Management, made $885,483 in salary and bonus for the year.
Read on to learn more about Midland Funding LLC and strategies for defending yourself against any collection lawsuits they might bring. With this information, you’ll be ready to confidently tackle any situation involving Midland Funding.
The Business of Buying Defaulted Debts
Let’s get one point out of the way: it is legal to buy and sell debt. The borrower doesn’t need to give their approval for the debt to be sold, and they remain liable to the new owner once the account is transferred. You can argue about it, but it won’t get you anywhere useful. Accept the facts and move on.
If the original creditor can’t get you to pay the debt, it makes sense that they’d try to sell the account to minimize their losses. The company that buys the debt doesn’t want to pay full price for the account, which is why these debts are sold at such steep discounts. The industry is so sophisticated that these sales are often negotiated years in advance using forward-flow agreements.
In an ideal world, the debt buyer should receive enough information and documentation to prove who’s liable for payment and the balance due. Such items include:
- The original agreement, including the terms and conditions under which the original lender agreed to extend credit;
- copies of statements showing how the borrower incurred the debt, including the dates of transactions;
- A complete accounting that shows how interest and other charges were calculated, as well as how payments were apportioned;
- Proof that the buyer actually purchased this specific account; and
- The terms and conditions of the sale of the account.
Unfortunately, this seldom happens.
What Midland Funding Gets When They Buy a Debt
Midland Funding buys billions of dollars worth of debt each year with the goal of spending as little as possible for each account. To cut costs, Midland (and just about any other debt buyer out there) buys nothing more than an electronic file of names, addresses, and amounts due. The company doesn’t ordinarily receive copies of agreements, statements, or anything else that would prove the amount or ownership of the debt.
The agreements covering these transactions allow Midland Funding to get more information, but it may cost as much as $100 per account.
That may not sound like much of an investment, but when you consider that Midland Funding is buying tens of thousands of accounts, you can see how it can add up and cut into their bottom line.
The Midland Funding Business Model
Now that we have a basic understanding of Midland Funding let’s dive deeper into their ownership and business model. As mentioned earlier, Midland Funding is part of Encore Capital Group, a publicly-traded debt collection business. Encore Capital Group operates through three primary entities: Midland Credit Management, Midland Funding LLC, and Atlantic Credit & Finance.
So how does their business model work? Midland Funding buys huge bundles of debt, sometimes thousands of accounts at a time, and hires Midland Credit Management or Atlantic Credit & Finance as its debt collector. Some people will pay the debt, and others won’t.
If Midland Credit Management doesn’t collect, then Midland Funding will usually file a lawsuit to collect the unpaid balance. How often do they file a lawsuit? Consider this statistic: in May 2019, Midland filed 12,805 collection cases in Los Angeles Superior Court. That’s one month and one county.
Though Midland is within its rights to collect on the debt they’ve purchased, the company has faced legal and regulatory actions after violating various state and federal consumer protection laws.
Legal and Regulatory Actions Against Midland Funding
Throughout the years, Midland Funding and its parent company, Encore Capital Group, have faced various legal and regulatory actions for their debt collection practices.
One notable case was in 2018 when the Consumer Financial Protection Bureau (CFPB) sued Encore Capital Group, Midland Funding, Midland Credit Management, and Asset Acceptance Capital Corp. for running afoul of debt collection laws. The companies agreed to pay a combined $79 million for violating the Fair Debt Collection Practices Act and the Consumer Financial Protection Act by suing consumers without proper documentation, attempting to collect on debts that were too old, and failing to provide consumers with legally required disclosures.
That same year, the company was sued by 42 states and the District of Columbia for engaging in illegal debt collection practices, such as filing lawsuits without proper documentation and attempting to collect on debts that were too old. Midland paid a $6 million settlement to resolve that lawsuit.
In 2022, the company paid $12 million to resolve allegations made by the Commonwealth of Massachusetts that it had engaged in deceptive and unfair debt collection practices, such as filing lawsuits against consumers without proper documentation, collecting on time-barred debts, and harassing consumers with excessive phone calls.
These actions are in addition to the hundreds of lawsuits filed by individuals against Encore and Midland for violating their rights under the Fair Debt Collection Practices Act, Fair Credit Reporting Act, and various state consumer protection laws.
Why Midland Funding Gets Judgments So Often
Most of the time, when someone is sued by Midland or another debt buyer, they fail to defend the case or show up in court.
With no opposition to the lawsuit, the judge grants a judgment in Midland’s favor. Once that judgment is issued, Midland can collect through wage garnishment, bank account levy, and other tactics.
Strategies for Defending Against Midland Funding Collection Lawsuits
As I said, Midland Funding isn’t getting much documentation when it buys old debts. By defending the credit card lawsuit, you can maximize your chances of getting a very good settlement or winning the case entirely.
Here are some strategies for defending against Midland Funding collection lawsuits:
- Respond to the lawsuit within the specified time: It is crucial to respond to the lawsuit within the time frame specified under the law to avoid a default judgment. Failing to respond in time will result in the court automatically ruling in Midland Funding’s favor.
- Raise all appropriate defenses: There are several defenses you can use against a collection lawsuit, including:
– Liability: are you legally responsible for the debt?
– Statute of limitations: has the time for Midland to sue you expired?
– Standing: does Midland Funding have proof of its ownership of the debt?
– Accounting for the balance claimed: can Midland prove the accuracy of the balance due?
- Consider hiring an attorney: You’re not required to hire a lawyer to represent you in a collection lawsuit, but the legal system is very technical so you may have a better chance of winning your case with an experienced attorney on your side. You can get in touch with me to see if I can represent you.
By understanding your rights and options when facing a Midland Funding collection lawsuit, you can take the necessary steps to protect yourself and your financial future.
That judgment, in California at least, can be renewed indefinitely. And once the judgment is issued, it’s difficult to get it lifted.
ABOUT THE AUTHOR
Since I became a lawyer in 1995, I’ve represented people with problems involving student loans, consumer debts, mortgage foreclosures, collection abuse, and credit reports. Instead of gatekeeping my knowledge, I make as much of it available at no cost as possible on this site and my other social channels. I wrote every word on this site.
I’ve helped thousands of federal and private student loan borrowers lower their payments, negotiate settlements, get out of default and qualify for loan forgiveness programs. My practice includes defending student loan lawsuits filed by companies such as Navient and National Collegiate Student Loan Trust. In addition, I’ve represented thousands of individuals and families in Chapter 7 and Chapter 13 bankruptcy cases. I currently focus my law practice solely on student loan issues.
I played a central role in developing the Student Loan Law Workshop, where I helped to train over 350 lawyers on how to help people with student loan problems. I’ve spoken at events held by the National Association of Consumer Bankruptcy Attorneys, National Association of Consumer Advocates, and bar associations around the country. National news outlets regularly look to me for my insights on student loans and consumer debt issues.
I’m licensed to practice law in New York and California and advise federal student loan borrowers nationwide.