The attorneys general of 38 U.S. states are opposing a $5.7 million settlement of a class action lawsuit against debt buyer Encore Capital Group over the ARM firm’s use of affidavits to prove the validity of debt it collects against.

The AGs have formed a group and made a court filing June 1 which called the settlement “paltry” and unfair to consumers, according to Reuters.

The settlement has come under intense scrutiny after the Minnesota Attorney General launched inquiries into the Ohio-based cased. Minnesota Attorney General Lori Swanson wanted to know if the settlement precluded separate state actions for the same reason. She ultimately filed a lawsuit against Encore in March.

Encore disclosed and discussed the class action settlement in its earnings report for the fourth quarter of 2010. Encore further noted that the settlement did not admit any wrongdoing and that the practices in question had been amended in 2009.

But the attorneys general feel that the settlement does not compensate the class appropriately while overly-enriching the plaintiffs attorneys that brought the case. They would also like the opportunity to pursue their own actions against Encore. The class action settlement, while announced in February, is not final and was open to objections until June 1. A fairness hearing, typically a formality, is scheduled for June 11.

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