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Maryland officials yesterday ordered San Diego-based Encore Capital Group, one of the nation's largest debt buyers, to stop all collection activities in the state after alleging they engaged in "large-scale unlicensed and illegal collection activities."

In a press release, the state's Department of Labor, Licensing and Regulation stated that Encore and its subsidiaries – Midland Funding LLC, Midland Portfolio Services LLC and Midland Credit Management Inc. - violated federal and state laws by refusing to validate bad debts when challenged. The Department added that the companies could be facing potential penalties and restitution of more than $40 million. Midland Credit also had its license to collect in the state suspended by the Commissioner of Financial Regulation.

Encore Capital officials deny any wrongdoing and are reportedly in talks with state. The company has 15 days to schedule a hearing. Officials at Maryland's Department of Labor, Licensing and Regulation did not return calls for comment.

Encore Capital is the third-largest debt buyer in the U.S. with more than $240 million in revenue from purchased debt in 2008, according to research conducted by Collections & Credit Risk and CCR Newsline.

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