Minnesota Attorney General Lori Swanson is backing legislation that would force all debt buyers to prove in court that they use reliable information when going after debtors.
The legislation would require debt buyers to establish evidence of the validity and amount of the debt; that the correct debtor is being targeted; and that they properly own the debt in question.
"A debt buyer should have admissible evidence," Swanson said. "In our American court system, to win in court, you should have to prove your case in court."
Companies that buy debts from banks and credit card companies often get default court judgments against debtors by using information that's incorrect or incomplete - failing to properly notify debtors about court proceedings, for example, because of old addresses or misspelled names, Swanson said.
The legislation includes twin bills that were introduced in Minnesota's House and Senate on Monday. The bills were placed in each chamber’s Judiciary Committee for further action.
Sen. Ron Latz (D-St. Louis Park), chairman of the Senate Judiciary Committee, said that many judges already hold debt buyers to acceptable proof standards, but an overburdened court system has allowed cases to fall through the cracks.
According to Swanson, debtors often don't receive timely notice of court proceedings or don't have the resources to represent themselves, so judges sometimes grant the default judgments based only on summary data provided by the debt buyers.
Swanson cited Midland Funding LLC, which filed more than 15,000 lawsuits against individuals in Minnesota courts since 2008.
Midland settled a lawsuit with the state in December by agreeing to change its collection practices after Swanson's office accused it of filing unreliable court papers and targeting people for debts they didn't owe.
In sworn testimony, Midland employees admitted that they signed up to 400 mass-produced affidavits each day either without reading them and/or without knowing what they contained or if the information was accurate, according to Swanson.
Midland, a subsidiary of San Diego-based Encore Capital Group, did not admit any wrongdoing as part of the settlement. Company officials said a fresh review by a former federal judge found that much of what was agreed to in the settlement has been in place since 2009 when Midland voluntarily strengthened its processes for generating affidavits.
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