NEW YORK—Two separate actions have been taken against proprietors of debt-collection firms, including a guilty plea from one former CEO.
The defendants behind a New York-based debt collection scheme will be permanently banned from the debt collection industry under a settlement with the Federal Trade Commission and the New York Attorney General, who alleged that the defendants bilked consumers out of millions of dollars by brokering and collecting on fake debts that people did not owe.
“We’re proud to partner with the New York Attorney General in our efforts to clean up this industry and stop unlawful and abusive practices,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection.
According to the FTC’s complaint, Hylan Asset Management, LLC, and its owners, Andrew Shaevel and Jon E. Purizhansky, bought, placed for collection, and sold lists of phantom debts, including debts that were fake or not authorized by consumers.
Hylan referred the fake debts to several collection agencies, including Worldwide Processing Group, LLC, which then illegally collected on them. Hylan continued to buy the portfolios and distribute them to third parties for collection even though it was repeatedly notified that consumers did not owe many of the debts, the FTC alleged.
According to the agency, Worldwide Processing similarly continued its collection efforts after consumers said they had never heard of the lenders and provided records to prove they owed nothing. The FTC further stated Worldwide Processing also illegally contacted consumers’ friends and family members about the purported debts and failed to make disclosures required by the Fair Debt Collection Practices Act. The complaint also alleged that Hylan purchased much of the debt from Hirsch Mohindra, a defendant in a separate FTC action who was banned from the debt collection business and from selling debt portfolios. Mohindra bought the debt from former payday loan generator Joel Tucker, who was banned from possessing or distributing sensitive consumer information, including consumer debt portfolios.
“Repaying debt is stressful enough without the added worry that collectors are faking bills,” said New York Attorney General Letitia James. “Stopping this massive scheme is a win for every New Yorkers who no longer have to fear being swindled out of millions of dollars for phantom debts. My office will continue to stand up for consumers to stop illegal debt collection and debt brokering activities. I thank our partners at the FTC for their work on this case.”
The order against the defendants involved in Hylan Asset Management bans the company and its owners, Shaevel and Purizhansky from debt collection activities, including buying, placing for collection, and selling debt. The order imposes a judgment of $6.75 million, which is suspended due to inability to pay upon payment of $676,575.
The order against the defendants involved in Worldwide Processing bans the company and its owner, Frank A. Ungaro, Jr. from engaging in unlawful collection practices. The order imposes a judgment of $4.94 million, which is suspended due to inability to pay upon payment of $118,000.
Debt Collection Company CEO Pleads Guilty
Separately, the owner of a fraudulent debt collection company that cost its clients–including credit unions–and debtors more than $4 million in losses has been sentenced to six years in prison.
According to the U.S. Attorney’s Office Eastern District of California, Charles V. Stanley Jr., 65, of Agua Dulce, Calif., who had earlier been found guilty of a 15-count indictment for conspiracy to commit bank fraud, mail fraud and wire fraud, as well as separate counts of bank fraud, mail fraud and wire fraud, was given the six-year sentence.
Stanley owned and operated Creditor Specialty Service, Inc., a debt collection company that included among its clients credit unions in Sacramento, Folsom and Bakersfield, the releases said.
How Fraud Occurred
The U.S. Attorney’s Office said that under Stanley’s guidance, employees collected money from debtors but would report less money than the amount they actually collected, and would also continue to collect money from debtors even after the institution that hired CSS ended the contract.
Stanley was out on bail following his arrest but was placed back into custody Feb. 14, 2018, after it was determined he may have committed additional crimes while on release, according to court documents. He pleaded guilty while in custody, court documents said.