I recently spoke with a woman who had just been sued by Midland Funding LLC for a debt they bought from Citi bank. The amount she is being sued for is a few thousand dollars. She is being sued by a debt collection attorney in her state after collection attempts were fist made by Midland Credit Management (MCM). Both Midland Funding and MCM are part of Encore Capital Group, which is one of few publicly traded debt buying companies in America, and one of the largest in the world.
I want to share the facts of her situation because they may help if you are getting collection notices and phone calls from Midland Credit Management, or if you are being sued by Midland Funding.
Credit card bills that go unpaid are packaged up in large bundles and sold off to bad debt investors in the normal course of lending. A portfolio of debt being bought by companies like Midland Funding could include your account, and thousands of other unpaid credit card bills.
Having your credit card debt bought by a debt buyer like Midland Funding is not unusual. And depending on how the debt collection and debt buying landscape changes in the next year or three, it could become even more common than we see today.
Midland Funding and Midland Credit Management are different.
While Midland Credit and Midland Funding share the same ownership under Encore Capital, each company does something different, and those differences matter to you. Midland Funding is the debt purchasing arm, while MCM will be recognized as the active debt collection agency, similar to how you would view any other debt collector,
Midland Credit Management sent a debt collection letter to the woman I reference above. Receiving a debt collection letter from a collection company you don’t immediately recognize is a normal occurrence. Collection agency letters and phone calls are the 2 primary ways a debt buyer, or the debt collectors they hire, will try to get you to pay.
You have options for handling the collection efforts from debt buyers and the debt collectors that work for them. If you are in a position to work out a settlement for less than what is owed on the now purchased account, doing so after the first phone call or collection letter you receive, is something to consider.
Understand that making arrangements to pay a debt buyer the full amount for a debt they bought is not going to go to your original creditor. The debt buyer is not a lender, but an investor. They are risking money to buy up bad debt to turn a profit.
Midland Funding is willing to accept less than the face value of your debt through its debt collection arm Midland Credit Management. How much less will vary. You are welcome to comment below and start a conversation about what you might be able to do in your situation.
Update 2015: Midland Funding generally shows up on your credit reports. Once on them, you cannot pay Midland to delete the derogatory. You can negotiate a lower payoff and Midland Funding will update your credit reports to show the account is resolved and a zero balance owed. This will help you get a home loan through, and benefit you in other ways too.
There is a delay between Midland Funding buying your debt, and them reporting to the credit bureaus. Midland Credit Management will often start off the collection process by sending you a dunning letter (written collection notice), or make collection phone calls that you may pick up. In the letter or phone call they may now offer you the opportunity to settle or set up payments on your account in order to prevent the credit reporting of the collection account from occurring at all. Last I heard you have a month or two to take advantage of this offer. If you can afford the money to settle, or set up payments you are confident you can pay each month, there are immediate and long term benefits to doing this. It is not a trick, they actually do this, and may be the only debt collectors making this type of offer.
The woman sent a debt validation request letter to Midland Credit Management.
Sending a debt validation letter to a debt collector is your right. If for any reason you question the nature of the debt being collected, requesting validation from a collection agency or debt buyer will accomplish a couple of things:
- Triggers an obligation under federal (and state law) on the part of the debt collector.
- A written response from the debt buyer should include solid details about the original creditor, the amount owed, and often some form of documentation to back up their claim (not simply a reference to their own spread sheet of debts they purchased).
- Debt buyers and debt collectors do not always respond to your request for validation, but the response is often sufficient to meet the standard that would allow them to continue to collect (the federal debt validation standard is low enough to trip over, your state law standard may be a little tougher).
- Debt buyers may never respond to a debt validation letter. The account may end up with a different collection agency, or sold off to a different debt buyer (Midland does not resell much debt by their own admission). It is not a stretch to assume that this occurs because of the inability to verify debts that are purchased.
Midland Credit Management did not respond to her validation request to her knowledge.
It is not uncommon for a debt buyer to ignore a validation request. The reason validation of debt requests are ignored by Midland Credit Management, and other debt collectors and debt buyers, is that sometimes no meaningful information was included when the debt was purchased. There are sometimes options to acquire detailed information from the original creditor at an additional cost, but that is not always the case. And you may not appear all the collectable to a debt collector, and they just may not bother if they see a low probability that you will pay anything.
When debt validation requests are ignored Midland Funding may assign to another debt collection agency or collection attorney.
Many years ago I came to the conclusion that sending debt validation requests to a debt collector like MCM, when you already recognize the debt as yours, and your goal is to resolve the debt by settling with the collector for the lowest amount possible, is counterproductive.
Midland Funding sued her to collect.
The woman who inspired this post next received a collection letter from a well known and very active debt collection law firm in her state. She sent a new validation request to the attorney debt collector hired by Midland Funding. The collection attorney responded to the validation request with some basic information about the original account including monthly billing statements from the original creditor. Shortly after receiving the debt validation response in the mail from the Midland Funding attorney she was served with a lawsuit.
Debt buyers will target accounts they buy for aggressive collection. Midland Funding is part of the largest debt buying collection brand in the nation. Lawsuits to collect can play a big part in how a debt buyer like Midland Funding will look to turn a profit on their investment in defaulted credit card debts.
The debtor in this case shared with me that she knew the sister of the process server that showed up at her door to serve the lawsuit. With that connection, a friendly enough conversation took place. The process server shared the fact that she had a list of Midland Funding lawsuits to serve – about two hundred of them. She lives in a county with a small population. Two hundred or so lawsuits on debts bought by Midland Funding is not unremarkable given the amount of people there are in the area.
What to do about Midland Funding collecting on debts you could not afford to pay.
If you are contacted by Midland funding, or by Midland Credit Management, or some other Encore debt collection brand, consider the following:
- Are you able to come up with a plan to resolve the debt for about half of what is owed? If you can afford to settle with MCM or Midland Funding you can contact them and work toward getting a deal negotiated, a written agreement on the collectors letter head outlining the terms, and pay it off. While it is recommended to negotiate and settle with MCM or Midland Funding in a single lump sum payment whenever possible, you can also look to set up monthly payments that you are confident you can afford and follow through with to completion. Midland Credit Management and Midland Funding both offer different methods to resolve debts they are collecting while giving you time to pay.
- If you are not familiar with the debt they allege you owe, or do not see how you could possibly owe the amount being alleged that you owe, request the debt be validated. Send your request in writing via certified mail return receipt requested. If you do not hear back from them do not assume they went away, that the debt cannot be sent to a different collector, or sold off to a different debt buyer. I do not recommend this approach if you want to resolve a debt that you know to be yours.
- Be certain you are aware of how long it has been since you last paid on the account and compare that to the SOL (statute of limitations) for being sued on your type of debt in your state. You may learn that you cannot legitimately be sued for the debt as it has passed the SOL. That does not mean the debt can no longer be collected, or that you should ignore it. The account is likely showing up on your credit report. If you have a goal of buying a home, or refinancing an existing home, you may find you are forced to settle collection accounts in order to qualify for a loan later on. And settling later on may come at a higher price. Avoid applying for credit of any nature just prior to negotiating with Midland Credit and other debt collectors (it makes you look more collectable)
Depending on your current financial situation, looking for affordable settlements and paying off debts with Midland Credit Management and Midland Funding will set you up for less stress and the ability to achieve later financial goals.
The woman who inspired this article was a CRN member from a few years ago. She was laid off from work and struggled to find a new job. She could no longer afford to make payments on her credit card debts and was referred to me by her accountant. I worked with her and her husband to develop a plan to settle her unpaid debts, rather than file bankruptcy (they had filed in the 90’s and did not want to go through that again). She was able to knock down her largest 6 credit card balances by settling with her original creditors using money she was able to borrow from a family member. Her husband’s hours were then cut back at his job, and it became impossible for her to follow through with the plan, leaving a couple of her smaller balance accounts unresolved, the Citibank account Midland Credit Management began collecting was one of them.
She did not reach out to me for feedback on dealing with the Midland Credit Management collection letter she received. Instead, she went to the internet and found what she said was the consistent advice to send a debt validation letter to MCM. She thought the collection account was behind her when she did not hear back from MCM. When she received the attorney collection notice in the mail for the same debt, she simply repeated her debt validation request again. She did not know how, or what to respond to the collection attorney with, once they mailed back evidence of a debt she already knew she owed. She only contacted me again after she was sued by Midland Funding.
Settling with Midland Funding LLC when sued.
I suggested she connect with a local consumer attorney about her options to handle the lawsuit. After that consultation she decided to settle the lawsuit from Midland Funding. She got a good deal to be sure, but she was settling on a total balance that had increased by roughly a third of what MCM was originally collecting due to attorney costs. She could have settled directly with Midland Credit Management early on, and for a much better savings, and less stress.
There is, often enough, also going to be a difference between the amount you can negotiate and get approved to settle for, when you are dealing with a debt collection attorney. It is not uncommon to see a 20 or 30 percent premium to settle a Midland Funding debt once sued for collection, compared to negotiating before the account hit the courts.
If you are just not in any shape financially to follow through with any strategy to resolve the debt with Midland now in the courts, you may end up with a judgment against you. Judgments can be settled for less down the road, so keep that in mind. But you may want to consider defending against any collection lawsuit too. There are good resources that can help you, but you will want to assess the costs and time involved in any effort to defend collection lawsuits.
You may be reading this and in a situation where you cannot possibly think of how you can resolve a debt being collected by MCM or Midland Funding. I understand that. The situation is what it is, and sometimes all you can do is wait for things to improve before tackling old debts. However, you may want to at least learn about the options any of the “Midlands” may make available to you to tackle debts they are collecting. You may be surprised by some of the flexibilities that are available. You may even be able to avoid being sued later.
If you have received collection notices from an attorney for Midland Funding, or have been sued by an attorney for collection, you will want to contact the attorney directly. You should also consider speaking with an experienced collection defense attorney of your own.
If you are trying to resolve an existing judgment from Midland Funding, you have options for that as well.
There will be additional pressures on Midland Funding, Midland Credit Management, Encore Capital Group, and many other collectors and debt buyers, as a result of new federal regulatory supervision. The CFPB will began its supervision and enforcement of debt collectors and debt buyers with revenue in excess of 10 million yearly. I will cover more of what the CFPB supervision of debt collectors and debt buyers may mean as changes occur.
If you have recently been contacted for collection by Midland Credit Management or Midland Funding, either with a collection call, a collection letter, or a collection lawsuit, and you have questions about your options, or what to do next, I welcome you to post them below in a comment. I will assist you with my feedback, suggestions and additional resources.
You can also talk with me direct by calling 800-939-8357 and choose option 2, or submit a consult request form.
I edited this post 3/20/13 in order to provide a more fluid story that now includes how the woman referenced resolved her Midland collection experience, and on 6/26/15 to update the early offers Midland makes to prevent the account from showing on your credit reports.