A Dallas Attorney's One-Man Crusade Against a Debt Collection Giant
frankieleon, via Flickr
In early 2011 then-Texas Attorney General Greg Abbott moved to bring down the hammer on Midland Funding, one of the country's more rapacious debt-collection outfits. Every year the company would buy billions of dollars in debt from banks and credit card companies for pennies on the dollar (in 2010 those figures were $10.9 billion and 3.3 cents, respectively) and then badger the debtors in an attempt to turn a profit.
Such trafficking in bad debt is perfectly fine and legal so long as companies comply with certain rudimentary restrictions on how and when they go about collection; indeed, it has become a vital lubricant for the modern consumer credit market. But according to Abbott's lawsuit, Midland's practices crossed various legal and ethical boundaries. Specifically, he accused the company of chasing debts based on inaccurate or incomplete records, often targeting individuals who either hadn't incurred the debt or had already paid it off, and of "falsifying and robo-signing affidavits" (some Midland employees signed more than 300 affidavits per day despite lacking any substantive knowledge that the debt they were swearing to was legit) included in many or most of the 60,000-plus lawsuits the company had filed in the previous decade.
When the hammer finally fell 10 months later, the blow was almost imperceptibly soft. In December 2011 the AG's office reached a settlement with Midland and its affiliated companies, which agreed to pay some $500,000 in civil penalty, plus $80,000 in attorneys' fees, and make certain reforms to its debt-collection practices. The half-million would trickle down to debtors in the form of a maximum $500 in credits toward any judgments still outstanding. Otherwise, the settlement did nothing to identify or address any individual acts of fraud on Midland's part.
Enter Dallas lawyer Ross Teter, who is either a high-minded crusader for fair debt collection (according to him), a grasping and unscrupulous plaintiff's lawyer (his opponents), or maybe both. In recent weeks he has embarked on a quixotic campaign seeking redress for individual debtors who were screwed by Midland's robo-signing practice, or at least for the 550 or so whose judgments were handed down in Dallas County. On Monday alone he filed 19 lawsuits on behalf of the "Texas Association of Fraudulent Judgment Victims," which sounds like it might be an established consumer advocacy groups but which was actually formed a few months ago by Teter himself as a way to fund litigation, as Midland's victims are unlikely to have the means to pay for it themselves.
Teter has had some amount of success combating Midland before. In 2010, a Dallas County jury hit Midland with an $8 million judgment in a case involving $9,000 in debt. (The eye-popping judgment didn't stand; Teter later settled with the firm for a fall smaller sum he declined to disclose). But his current crusade is complicated by the fact that he doesn't actually know which of Dallas County's 550 debtors is the victim of a robo-signed affidavit, which explains his unorthodox legal approach. None of his recent lawsuits names Midland as a party. Instead, he's going after the locally based attorneys who filed debt collection lawsuits on Midland's behalf, not because he suspects the attorneys themselves of wrongdoing, but because he thinks they can produce information through the discovery process that will break open his case against Midland. "It's like when the FBI investigates somebody on white collar crime," he explains. "They usually stat at the bottom and build from the bottom to the top. That's how you get people to testify and cooperate."
In an exchange with the ABA Journal two months ago, an attorney representing the Hosto & Buchanan law firm, Teter's first target, dismissed Teter as a troll, albeit not in so many words. "The claims asserted are without merit and the firm intends to vigorously defend the lawsuit while also seeking sanctions against Mr. Teter for bringing frivolous claims,” he told the Journal, going on to provide a list of similar Teter lawsuits that have been dismissed or resulted in sanctions. (Between 1993 and 2005 Teter was disciplined at least twice by the Commission for Lawyer Discipline according to Dallas County court records, though documents from those cases aren't available online.)
Teter brushes aside the attacks as empty bravado and expects his opponents won't be so dismissive once his case picks up steam. By his math, Midland and its hired-hand attorneys could be on the hook for more than $5.5 million, assuming all the Dallas County judgments are found to have been backed by a sham affidavit and $10,000 sanction for each case. First, though, he has to force the lawyers to talk.
Send your story tips to the author, Eric Nicholson.
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