Judge Dismisses Unfair Debt Collection Lawsuit Against Midland

A federal judge has dismissed an unfair debt collection lawsuit brought by two California women who sued a credit management agency alleging that the company violated federal consumer protection laws by failing to provide a mandatory consumer-rights notice and contract and by making false and misleading representations about their credit records.

But U.S. District Court Judge Cynthia Bashant has ruled that the plaintiffs could not prove Midland Credit Management Inc. was acting as a credit repair organization and, therefore, did not violate federal consumer protection laws governing those organizations.

Patricia K. and Susan P. sought class action status to represent a nationwide Class of consumers who were similarly solicited by Midland Credit Management.

The federal Fair Debt Collection Practices Act (FDCPA) prohibits debt collectors from using abusive, unfair, or deceptive practices to collect debts. According to the FDCPA, debt collectors are also prohibited from making false statements and attempting to collect debts that have expired or are not owed (such as those discharged in bankruptcy or debts previously settled), making improper reports to credit reporting agencies and contacting third parties, such as family members or employers, in an effort to collect the debt.

If a debt collector is found to have violated the FDCPA, the debtor is entitled to receive $1,000 in statutory damages, plus any actual damages that they have suffered. [Learn more about how to recover damages for debt collection abuses.]

According to their FDCPA lawsuit, Patricia and Susan received letters and brochures from Midland between April 13, 2012 and Jan. 22, 2014, containing statements representing that Midland could perform credit repair services for them.

The women were told that their past due balance was being reported to the credit reporting bureaus and would remain a negative item on their credit report.

“We can help you get back on track. … Once you make a payment, interest will stop being applied to your account[,] [y]our credit report will be updated with the payments you make[,] [and] [t]he account will appear on your credit report as Paid in Full after you’ve completed your payments,” the letters read.

“Special offers are now available to help you resolve your unpaid CitiBank account … [w]e can help you get back on track. … [W]e will not sue you for repayment of this obligation. This account may still be reported on your credit report as unpaid, and repaying the obligation may help toward improving your credit.”

Simply telling consumers it could “help [them] get back on track” did not constitute offering credit-improvement services or advice, according to the judge’s ruling. The plaintiffs were given the option to amend their unfair debt collection lawsuit. Per the Credit Repair Organizations Act, Patricia and Susan need to show that Midland acted as a credit repair organization.

“Midland does not offer any service for the purpose of providing assistance or advice to improve consumers’ credit record in return for payment,” Judge Bashant wrote in her decision about the illegal debt collection lawsuit. “Midland does not represent that its services can improve or assist in improving a consumer’s credit record, history, or rating.

“Midland, as a debt collector, is simply seeking the repayment of debts owed and in doing so encourages the repayment of debts owed to it and acknowledges the benefits of repayment. Seeking the repayment of a debt and utilizing ‘the potential of a lower credit score as motivation to encourage [a person] to pay the debt” does not make a person a credit repair organization,” she explained.

Join a Free Unfair Debt Collection Class Action Lawsuit Investigation

If a lender or debt collector engaged in unfair debt collection practices, you may have a legal claim and could be owed compensation for violations of the Fair Debt Collection Practices Act (FDCPA).

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DISCLAIMER: Debt collection itself is not illegal. However, debt collection firms collecting on consumer debts must adhere to the FDCPA. Even though debt attorneys are investigating these companies, their debt collection practices may be legal.