State AGs oppose settlement with Encore unit

NEW YORK, June 3 Fri Jun 3, 2011 12:20pm EDT

NEW YORK, June 3 (Reuters) - A group of 38 state attorneys general are opposing a proposed class action settlement with Encore Capital Group Inc's (ECPG.O) Midland unit over robo-signed affidavits.

The proposed settlement is "paltry" and unfair to consumers, the group said in a June 1 court filing.

The settlement, which would provide up to $5.7 million for 1.4 million class members, was announced in February. San Diego-based Encore, which often buys debt from credit card companies, agreed to settle claims that the company <relied on> false affidavits to bring debt collection lawsuits.

"Under any interpretation, the ten-dollar-per-class-member settlement is not fair, reasonable, or adequate to address the harm incurred," the attorneys general, led by New York Attorney General Eric Schneiderman, said in the brief, filed in federal court in Ohio.

The attorneys general, from states including California, Ohio and Massachusetts, also said the agreement unfairly forces class members to release any claims against the company, allowing Midland to pursue claims against plaintiffs.

"The settlement strips class members of their right to defend against existing lawsuits and to seek to vacate judgments obtained through defendants' use of false and misleading affidavits," the attorneys general wrote.

The attorneys general also objected to $1.5 million of fees for plaintiffs counsel, and the "generous" payment of $8,000 for the named plaintiffs in the case.

U.S. District Judge David Katz in Toledo, Ohio, preliminarily approved the settlement in March and set June 1 as the deadline for any objections. A fairness hearing is scheduled for July 11.

Plaintiffs' lawyer Dennis Murray Sr. at Murray & Murray didn't immediately return a call seeking comment.

A spokesman for Encore didn't immediately have a comment.

All 50 states are investigating robo-signing and other improper practices by banks in the mortgage industry.

In May, in a separate case, Minnesota sued Midland for filing robo-signed affidavits.

The case is Vassalle et al v. Midland Funding LLC, U.S. District Court, Northern District of Ohio, No. 11-00096. (Reporting by Carlyn Kolker; Editing by Steve Orlofsky)