West Virginia Attorney General Darrell McGraw's office sued two divisions of Encore Capital Group, claiming the firms participated in fraudulent collections and used false affidavits in lawsuits.
Midland Credit Management and Midland Funding LLC are both affiliates of Encore Capital, a San Diego-based debt buyer. The suit filed against them Thursday alleges the companies obtained default judgments against West Virginia consumers through robo-signed affidavits.
McGraw's office wants the court to force the companies to repay money obtained from consumers in the state, as well as paying $5,000 to the state for each violation of its consumer-protection law. It further wants to stop the companies from collecting in the state until the case is resolved.
Encore Capital offiicials were not immediately available for comment on the lawsuit. The company is one of the nation's largest debt buyers based on revenue, according to Collections & Credit Risk. It has purchased nearly $55 billion in past-due consumer accounts in recent years.
Last month the company reported its gross collections reached $761.2 million last year, up 26% from 2010. Its net income totaled $61 million on $467.4 million in revenue.
The Consumer Financial Protection Bureau last month proposed a regulation that would let it examine the books of collectors such as Encore Capital as part of its program to supervise nonbank financial companies (see story).