Why Encore Capital Group Shares Slumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Encore Capital Group , an asset management service that purchases and manages defaulted and unpaid portfolios of assets, fell as much as 11% after a U.S. appeals court voided its robo-signing settlement.

So what: The federal appeals court overruled a decision which would have settled whether or not Encore used illegal tactics to collect debt from 1.44 million consumers for $5.2 million. According to the appeals court, U.S. District Judge David Katz "abused his discretion" in his 2011 ruling, and noted that Encore's subsidiaries were "free to resume its predatory practices" as soon as one year after the injunction was up.

Now what: This is definitely bad news for Encore, which appeared to be getting off on the cheap with its initial settlement. With that verdict thrown out, those who currently have debt collection lawsuits against them and were listed in this settlement may have grounds to have the entire judgment against them thrown out. Until we have better clarity here, this is a company I'd rather avoid altogether.

Craving more input? Start by adding Encore Capital Group to your free and personalized Watchlist so you can keep up on the latest news with the company.

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The article Why Encore Capital Group Shares Slumped originally appeared on Fool.com.

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