Last week the Federal Trade Commission (FTC), together with the New York Attorney General, permanently banned Hylan Asset Management, LLC and its owners, Andrew Shaevel and Jon E. Purizhansky (collectively, Hylan), from collections and debt buying. The regulators also took action against Worldwide Processing and its owner, Frank A. Ungaro, Jr. (collectively, Worldwide), banning the company from engaging in unlawful collection practices.

According to the FTC’s complaint, Hylan bought, placed for collection, and sold lists of phantom debts, including debts that were fake or not authorized by consumers. They then placed the debts with several collection agencies, including Worldwide, which illegally collected on them. The FTC alleged that Hylan continued to buy portfolios and distribute them to third parties for collection even though it was notified repeatedly that the debts were not owed.

The complaint states that Worldwide similarly continued its collection efforts after consumers said they had never heard of the lenders and provided records to prove they owed nothing, and 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.

The order against Hylan imposes a judgment of $6.75 million, which is suspended due to inability to pay upon payment of $676,575. The $4.94 million judgment against Worldwide Processing is suspended due to inability to pay upon payment of $118,000. The full judgments will become due immediately if the defendants are found to have misrepresented their financial conditions.

insideARM Perspective

Legitimate debt collectors and debt buyers applaud these types of actions. Those who commit the behavior alleged in this complaint hurt consumers, but they also hurt all organizations that invest daily in doing the right thing the right way. For this reason, I take exception to the way this action was characterized by the FTC’s Director of the Bureau of Consumer Protection, Andrew Smith. He said,

“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.” (Emphasis added)

The reality is that these companies were not part of the industry. If the alleged behavior is true, they were crooks who based their business model on lies and deceit. They simply masqueraded as debt collectors – they could have chosen any industry but collections was an easy target. While legitimate collectors may make mistakes or get sued on technicalities, their businesses are based on following the law. There is a difference.

(Courtesy of Stephanie Eidelman.