Some Indiana consumers wrongly targeted by a California-based debt collection company will see at least some of their debts erased as a result of a settlement reached Tuesday with 41 states and the District of Columbia.

Indiana is among the states that accused Encore Capital Group Inc. and its subsidiaries, Midland Credit Management Inc. and Midland Funding LLC, of wrongly filing for judgments against consumers without verifying they actually incurred the debt.

The Indiana attorney general’s office said Midland reached a $6 million settlement with the states who joined in the lawsuit. That settlement provides full debt forgiveness for 126 Indiana consumers, totaling $160,552, and partial debt forgiveness to 116 Indiana consumers, totaling $214,600.

Encore is one of the largest publicly-traded debt buying and selling businesses in the nation. Companies like Encore and its subsidiaries will purchase debt from other creditors for pennies on the dollar and then attempt to recover the full amount from consumers.

Debt buyers will then take consumers to court to collect the amount owed, which often end up in judgments against the debtors, who may be unable to afford a lawyer to defend themselves.

In this case, Midland was accused of signing and filing affidavits in court in large volumes, without verifying that individual consumers actually owed the debts in question.

Settlement debt forgiveness applies to cases in which Midland used an affidavit against consumers in court between 2003 and 2009. Midland will notify affected consumers by mail of the balance reduction.

The settlement also requires Midland to reform its affidavit signing and litigation practices. Midland must carefully verify the information in affidavits and present accurate documents in court proceedings. When Midland files a lawsuit, it must have account documents about the debt before they file the case, including the amount of the debt, proof of an agreement, and an explanation about why any additional fees are justified.

The settlement requires that Midland maintain proper oversight and training over its employees and the law firms that it uses. The agreement prohibits Midland from reselling debt for two years.

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