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This has been going on for years.  When large debt buyers find out about widespread illegality within their company before they are actually sued for it, they do the following:

1.  Call up a friendly debt collection attorney.

2.  Convince said attorney to bring a class action.  Have the attorney give as little notice to potential class members as a court will let them get away with.

3.  Settle that class action for literally less than a penny on the dollar of the value of all the claims that could possibly be brought against them, without admitting liability.

4.  Sit back and enjoy immunity from any further lawsuits stemming from their illegality .  (The debt collection attorney gets himself a nice little fee in the process as well).  

Its a nice little game for everyone involved, except of course consumers which have been subjected to illegal debt collection and are left without any legal recourse.

Well a magistrate in Western New York has had enough of this outrageous behavior on the part of debt buyers.  Magistrate Jeremiah J. McCarthy has issued a scathing order denying class certification, denying the proposed class settlement and ordering the attorneys to show cause why they shouldn't be sanctioned.

  Felix v. Northstar Order to Show Cause

You should read the decision yourself.  It's a good read and explains everything far better than I could.  However, some things to note for those who might not have the time:

1.  You'll note that the class representative, a shill for the debt collection attorneys (who themselves are a shill for the defendants, the debt buyers) sought to have the class certified, and a settlement certified and the case closed with the only notice ever given to prospective class members being that the class representative himself would be given notice of the certification and settlement.  As the Judge himself exclaims, it's hard to imagine a proposed notice that is less likely to lead to the discovery of additional class members than that.  

2.  The attorneys failed to cite key contrary caselaw to the court that would clearly cut against their request to have their class certified and their settlement approved.  This was not a mere oversight because, as the court noted, in other cases they have disclosed this caselaw, indicating that it was their ethical duty to do so.  Coincidentally they happened to lose those cases.  A huge reason why the court seems to be so upset is that this gives the appearance that they are attempting to pull a "fast one."  

3.  The court actually implies, in the closing paragraphs that there is some sort of conspiracy between the defendant and the plaintiffs to have the settlement kept secret.

It will be interesting to see how this case is settled, if the attorneys are sanctioned, and if this deters these terrible class actions from being brought across the country.  

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