* Judge calls $5.7 mln accord fair, reasonable, adequate
* 38 state attorneys general opposed settlement
* Encore shares rise 49 cents (Adds details in ruling, Encore comment, background, byline)
By Jonathan Stempel
NEW YORK, Aug 12 (Reuters) - A federal judge approved Encore Capital Group Inc's (ECPG.O) controversial $5.7 million settlement to resolve allegations it used illegal and deceptive tactics to collect debts from roughly 1.44 million consumers.
U.S. District Judge David Katz in Toledo, Ohio called the settlement with Encore and its Midland Funding and Midland Credit Management units "fair, reasonable and adequate," rejecting allegations that it was collusive.
The settlement was intended to resolve claims that Midland relied on false or "robo-signed" affidavits to collect consumer debt that was not owed or was already paid off. Such affidavits are more commonly associated with the mortgage industry.
Thirty-eight state attorneys general led by New York's Eric Schneiderman opposed the accord, calling the payout "paltry" and inadequate to address the consumer harm. [ID:nN1E7671GX] They also said the accord stripped class members of their right to defend against existing Midland lawsuits.
But in a 35-page opinion, Katz called the settlement "beneficial to the public interest."
He said the total payout is "far above" the $500,000 cap under federal debt collection law, though a typical participating class member would recover just $17.38.
Katz also said the settlement provides "substantial injunctive relief" by requiring Midland to implement policies to ensure the accuracy of its affidavits, while "significantly penalizing" Midland for its earlier unlawful acts.
"The speculative possibility that certain class members may have more lucrative claims under state law should not prevent the classwide settlement," Katz wrote. "Moreover, any class member who believes he or she can obtain a greater recovery has been free to opt out."
Katz also called the $1.5 million of attorneys' fees "reasonable."
"I am extremely pleased that Encore is able to put this matter in the past and resolve nearly three years of litigation in a fair and equitable way for consumers," Encore Chief Executive Brandon Black said in a statement.
Encore said it changed its affidavit process in 2009 to make clear that its signers review underlying documentation.
A spokesman for Schneiderman did not immediately respond to a request for comment. The National Consumer Law Center, which also opposed the settlement, was not available for comment.
Based in San Diego, Encore typically buys debt from credit-card companies.
According to its annual report, through the end of 2010, it had invested $1.8 billion to buy 33 million accounts with a face value of $54.7 billion, or 3 cents on the dollar.
The attorneys general of Minnesota and Texas this year separately sued Encore raising claims similar to those in the nationwide case.
Encore shares rose after the decision was released, closing up 49 cents, or 2.2 percent, at $22.31 on the Nasdaq. (Reporting by Jonathan Stempel, editing by Bernard Orr)