A coalition of attorneys general from 38 states are opposing a proposed class action settlement with a credit card debt collection company accused of using robo-signers to bring false affidavits to debt collection lawsuits.

The proposed settlement with Midland Funding LLC., a unit of Encore Capital Group Inc., a San Diego-based debt collection company, would provide up to $5.7 million for 1.4 million class members while providing named plaintiffs with $8,000 payments and allowing plaintiffs counsel to collect $1.5 million in fees.

“Under any interpretation, the ten-dollar-per-class-member settlement is not fair, reasonable, or adequate to address the harm incurred,” the coalition of attorneys general said in a brief, filed in federal court in Ohio (“State AGs Oppose Settlement With Encore Unit,” Reuters, June 3, 2011).

The coalition, led by New York Attorney General Eric Schneiderman and including attorneys general from California, Ohio, and Massachusetts, also rejected the terms of the agreement, which it says unfairly forces class members to release any claims against Midland, thereby allowing Midland to turn around and pursue claims against class members.

“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 coalition said.

David Katz, the U.S. District Judge in Toledo, Ohio, preliminarily approved the settlement with Midland in March. A fairness hearing will be held on July 11.

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