A Consumer’s Guide to Midland Funding Debt Collection Lawsuits – Chapter 1 Who is Midland Funding?

Each and every year there are hundreds of thousands of lawsuits filed across the country by companies known as “junk debt buyers“. Despite the huge volume of lawsuits there are relatively few lawyers who handle these types of cases and even fewer who have taken the time to truly understand the issues surrounding these type of cases.

Who is Midland Funding?

Midland Funding, LLC (“Midland Funding”) is a wholly-owned subsidiary of Encore Capital Group, Inc. (“Encore Capital”).  Midland Funding is, in short, a junk debt buyer.  Midland Funding purchases old, charged-off debts from other debt buyers and lenders.

For example, a common Midland Funding transaction may have Chase Bank, USA selling a portfolio of delinquent accounts to Asset Acceptance, LLC who then sells the same portfolio of accounts to Midland Funding.

How Much Does Midland Funding Pay for the Debt it Sues on?

Midland Funding purchases and sues on debt on a huge scale.  From 2009 to 2015 Midland’s gross collections exceeded $5 billion. ¹⁾See Consumer Financial Protection Bureau Consent Order, 2015-CFPB-0022, p. 5, 9/9/2015. A recent study found that Midland Funding typically paid less than four (4) cents on the dollar for the debt that it purchased.

This means that a credit card account where the balance owed was $10,000 was often purchased by Midland Funding for $500 or less. Despite paying so little for the accounts in most states Midland Funding is permitted to file a lawsuit for the full balance and if it can prove its case Midland Funding will be permitted to collect on the full balance.

What is Midland Funding’s Debt Collection Strategy

Once Midland obtains a portfolio of accounts they will then send out an initial letter through its servicing company Midland Credit Management, Inc. (“MCM”).  The letter sent out by MCM is often labeled as a “Pre-Legal Notification” wherein they demand payment and request that if you have any objections to the amount owed that raise them in a letter to MCM.

While Midland Funding and MCM may do some traditional collections (i.e. phone calls, dunning letters, etc.) their main approach is to file debt collection lawsuits, obtain a judgment, and then garnish wages or levy your bank account.

95%+ Consumers Ignore Midland’s Lawsuits – And Do So to their Peril

In 2008 Encore Capital / Midland Funding filed 450,000 debt collection lawsuits around the country.  ²⁾As listed in Encore Capital Group’s 2008 10K statement filed with the Securities Exchange Commission, which is available at www.sec.gov/Archives/edgar/data/1084961/000119312509024779/d10k.htm.  Court statistics show that over 95% of the lawsuits filed by junk debt buyers like Midland Funding end with a default judgment.

A default judgment occurs when the person who is being sued by Midland fails to submit a written response to the lawsuit after they have been served with the complaint and summons.

This is unfortunate for two reasons: first, once Midland is armed with a default judgment they can garnish your wages, take money out of your bank account, lien your home, and even force the sale of non-exempt assets.  They can make life pretty tough.

Second, there are many good defenses to Midland Funding’s lawsuit and in many cases you can even get your case dismissed or thrown out after a trial.  But you must participate in the process if you want any chance of winning.

In the next chapter I will discuss the first steps in preparing and filing a written Answer to the allegations in the lawsuit and other options you have in resolving your Midland Funding lawsuit.