Minnesota Attorney General Lori Swanson announced Wednesday that her office had settled a lawsuit she filed in May 2011 over the legal collection practices of a major debt buyer.

Swanson said that Midland Funding, a subsidiary of Encore Capital Group, Inc. (NASDAQ: ECPG) has agreed to a consent judgment over its alleged use of “robo-signed” affidavits in collection lawsuits filed against consumers. Midland agreed to pay $500,000 to the state.

“This lawsuit was about respect for the legal system,” said Swanson in a press release. “In its rush to quickly collect old debts that it purchased for just a few pennies on the dollar, the company ignored legal requirements designed to protect the rights of an individual in court.”

As a part of the settlement, Swanson’s office said that Midland must amend some of its practices around the generation of affidavits used in debt collection suits against consumers to prove the company has a right to collect on the debt. A press release outlined 10 points of improvement for the company.

But Encore said that most of the “changes” the company agreed to took place years ago.

“After significant effort examining our company, Midland confirmed to the Minnesota Attorney General that no systemic issues were found with our current affidavit process,” said Greg Call, Encore’s SVP and General Counsel, in a statement provided to insideARM.com. “In addition, we confirmed that the underlying consumer debts are valid and that our current affidavit process accurately describes those debts.  This comes as no surprise to us, given that a former Federal District Court judge recently reached the same conclusion following his own extensive review of our current affidavit process. In fact, much of what we agreed to in the settlement has been in place since 2009, when we voluntarily reviewed and strengthened our affidavit process.”

Encore’s legal debt collection practices came under fire several years ago as numerous civil suits alleged that the company was robo-signing its affidavits, similar to issues that arose in the mortgage industry. Swanson said in her release Wednesday that her May 2011 lawsuit was the first governmental action against a debt buyer for filing “robo-signed” affidavits to support the debt buyer’s claims in individual lawsuits.

The company said that it has been committed to operating with integrity and treating consumers with respect, going so far as to codify those concepts in a Consumer Bill of Rights.


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