Commitments And Contingencies

6 Months Ended

Jun. 30, 2011

Commitments And Contingencies

Commitments And Contingencies

Note 12: Commitments and Contingencies

Litigation

The Company is involved in disputes and legal actions from time to time in the ordinary course of business. The Company, along with others in its industry, is routinely subject to legal actions based on the Fair Debt Collection Practices Act, or FDCPA, comparable state statutes, the Telephone Consumer Protection Act, state and federal unfair competition statutes, and common law causes of action. The violations of law alleged in these actions often include claims that the Company lacks specified licenses to conduct its business, attempts to collect debts on which the statute of limitations has run, has made inaccurate assertions of fact in support of its collection actions, and / or has acted improperly in connection with its efforts to contact consumers. These cases are frequently styled as putative class actions.

On May 19, 2008, an action captioned Brent v. Midland Credit Management, Inc et. al was filed in the United States District Court for the Northern District of Ohio Western Division, in which the plaintiff, Andrea Brent, has filed a class action counter-claim against the Company's subsidiaries Midland Credit Management, Inc. and Midland Funding LLC (the "Midland Defendants"). The complaint alleges that the Midland Defendants' business practices violated consumers' rights under the FDCPA and the Ohio Consumer Sales Practices Act. The plaintiff is seeking actual and statutory damages for the class of Ohio residents, plus attorney's fees and costs of class notice and class administration. On August 11, 2009, the court issued an order partially granting plaintiff's motion for summary judgment and entering findings adverse to the Midland Defendants on certain of plaintiff's claims. The Midland Defendants subsequently moved the court to reconsider the order and were partially successful. However, because the court did not completely reverse the August 11 order, certain portions of the order remain subject to reversal only on appeal. On February 22, 2010, the District Court denied plaintiff's attempts to enlarge the case to include a national class of consumers, and ordered the parties to brief issues relating to whether a statewide class should be certified. On November 4, 2010, the court granted in part, and denied in part, plaintiff's motion for class certification of a statewide class. On February 10, 2011, the parties reached an agreement in principal to settle this lawsuit, as well as two other pending lawsuits in the Northern District of Ohio – Franklin v. Midland Funding LLC and Vassalle v. Midland Funding LLC, on a national class basis, subject to entering into a definitive settlement agreement and obtaining court approval after notice to the class. On March 9, 2011, the parties entered into a final settlement agreement, which was preliminarily approved by the court on March 11, 2011. On July 11, 2011, the court held a final approval hearing with respect to the settlement, and the parties are awaiting the court's decision.

In addition, from time to time, the Company is subject to various governmental litigation, investigations, inquiries and other actions relating to its collection activities.

On March 28, 2011, the Office of the Attorney General of the State of Minnesota filed a motion in the United States District Court for the Northern District of Ohio, seeking clarification of an order granting preliminary injunction against parallel litigation (the "Order") issued by that court in connection with the case captioned Brent v. Midland Credit Management, Inc et. al. The Minnesota Attorney General sought a ruling clarifying that the Order did not prevent it from filing a complaint against the Company in Minnesota state court concerning its debt collection practices and related topics. On May 17, 2011, the District Court in Ohio ruled that the Order did not apply to the State of Minnesota. On May 19, 2011, the State of Minnesota filed a complaint against the Company in Hennepin County District Court alleging, among other things, contempt of court and violations of Minnesota's Collection Agencies Act based on the Company's debt collection and related practices in the State of Minnesota. The complaint seeks civil penalties, disgorgement of profits, injunctive relief, and attorney's fees. The Company intends to vigorously defend the allegations set forth in the complaint.

On January 12, 2011, the Office of the Attorney General of the State of Texas issued a civil investigative demand to the Company to produce documents in an investigation of its methods of collecting consumer debts in the State of Texas and related topics. On July 8, 2011, the Texas Attorney General filed a petition in the District Court of Harris County, Texas against the Company alleging violations of the Texas Deceptive Trade Practices Act and the Texas Debt Collection Act, based on the Company's debt collection and related practices in the State of Texas. The complaint seeks civil penalties, disgorgement of profits, injunctive relief and attorney's fees. The Company intends to vigorously defend the allegations set forth in the complaint. On May 2, 2011, the Department of Justice of the State of Oregon issued an investigative demand to the Company to produce documents and answer interrogatories concerning the Company's debt collection practices in the State of Oregon and related topics. The Company has and intends to continue to cooperate fully with the State of Oregon in response to this subpoena, subject to applicable law. In addition, on June 28, 2011, the Office of the Attorney General of the State of New York issued a subpoena to the Company to produce documents concerning the Company's debt collection practices in the State of New York and related topics. The Company intends to cooperate fully with the State of New York in response to this subpoena, subject to applicable law.

In certain legal proceedings, the Company may have recourse to insurance or third party contractual indemnities to cover all or portions of its litigation expenses, judgments or settlements. In accordance with authoritative guidance, the Company has recorded loss contingencies in its financial statements only for matters in which losses are probable and can be reasonably estimated.

Purchase Commitments

In the normal course of business, the Company enters into forward flow purchase agreements and other purchase commitment agreements. As of June 30, 2011, the Company has entered into agreements to purchase receivable portfolios with a face value of approximately $2.6 billion for a purchase price of approximately $70.0 million. Certain of these agreements allow the Company to terminate the commitment with 60 days notice or by paying a one-time cancellation fee. The Company does not anticipate cancelling any of these commitments at this time. The Company has no purchase commitments extending past one year.