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MHPC Achieves $2 Million Settlement of Federal Whistleblower and Class Action Lawsuits.

Chicago’s federal district court has given separate and final approval to settlements in two cases, totaling $2 million, against a local law firm for improper practices in the collection and reporting of consumer debts. John Malkinson was a lead attorney on each case. The lawsuits, one a class action on behalf of consumer debtors, and the other a “qui tam” action brought under the federal False Claims Act and the Illinois Whistleblower Reward and Protection Act, concerned consumer collections by local collection attorneys, Teller, Levit & Silvertrust, P.C., including collections on behalf of the state and federal governments. 

The cases arose from the defendant’s alleged late crediting of debtor payments on student loan and other consumer accounts, and its related false reporting of credit dates and consumer balances to its government clients. Judgments in favor of the plaintiffs on the issue of liability were entered in both actions.  Mr. Malkinson notes, “The court’s rulings have helped establish a blueprint in favor of consumers, detailing when cash, wage-garnishment, bank-garnishment and other payments on consumer debts must be credited. Debt collectors cannot simply credit payments on the date the collector chooses to record or deposit them.”  Late crediting of payments results in excess interest charges and larger principal balances over the life of an account.

The related federal False Claims Act and Illinois Whistleblower settlement returned $670,000.00 to the State and Federal governments in compensatory damages for the diminished value of Teller’s collection services, overpayment of attorney fees, and toward the cost of correcting the debtor payment and balance data. Pursuant to statutes, the “whistleblower”, a local consumer whose student loan debt was being collected by the Teller firm, was awarded 28% ($187,600.00) of the governments’ share of the settlement. [See case numbers, 00 C 3289 and 00 C 3290, Northern District of Illinios]

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