Buffalo, NY, Man Sued for “Phantom” Debt Collection

Inside Subprime: Oct 01, 2018

By Kerry Reid

We hear a lot about the personal debt loads facing Americans, which could reach a record high of $4 trillion by the end of this year.

The real debt is bad enough – but what about “fake” or “phantom” debts? Can someone make money off collecting debts that consumers don’t actually owe?

According to the Federal Trade Commission, the answer is “yes.” In June, the FTC and the New York State Attorney General’s Office filed a noncriminal complaint against two companies in western New York, alleging that they were attempting to collect on debts that they knew consumers did not owe.

Buffalo News reported that the FTC and attorney general accuse the companies of “obtaining the phantom debts from two known peddlers of fake debts and, even though they knew they were fake, placing those debts with collection companies.”

In an interview with Dan Herbeck of the Buffalo News published September 30, one of the accused principals denied the allegations. “I am not the man that the government portrays in those court papers[… ] The good person that my friends speak about – I’m that guy.’”

Dennis Vacco, an attorney for the accused, claimed that the government left out possibly exculpatory evidence. He cited a 2016 email from a FTC lawyer to Hylan referring to what he claims are the same debt portfolios at the center of the current lawsuit.

According to Vacco, the FTC lawyer alerted Hylan to the fact that the portfolios “can contain both legitimate and illegitimate debts and to, ‘proceed with extreme caution.’” Vacco noted that there was no cease-and-desist issued from the government at that time.

Herbeck’s article notes that Shaevel was aware of problems with “phantom debt” in the portfolio as of 2014, at least according to a November 2014 email cited in the court papers. In that email, “Shaevel complained that there was a ‘MAJOR problem’ and ‘major FRAUD’ in some of the debt Hylan had purchased from a company based in Chicago.” That company, which according to Herbeck’s report, was accused of “deceptive and abusive” debt collection in 2016 and banned from the business in 2017, after surrendering $9 million in assets to the FTC.

Nonetheless, the government asserts that Hylan continued to pursue payments through third parties on phantom debts in the portfolio into 2015. One of those parties generated more complaints to the Buffalo Better Business Bureau than any other business in the region, according to court papers.

Herbeck quotes Andrew Therrein of Rhode Island, who said four different collection agencies working for Hylan harassed him for payment – even after he proved he didn’t have any debt with Hylan. Herbeck also reports “According to government documents, Hylan deposited almost $23.8 million into its bank accounts between 2014 and early 2018.”

According to Vacco, Shaevel’s attorney, the government doesn’t actually know itself what percentage of the debts in the portfolio mentioned in the lawsuit are “phantom.”

According to Herbeck’s report, Buffalo is “a known hotbed of criminal debt collection practices.” Some companies set up shop without ever registering with the state.

If you’ve been contacted by people demanding payment on debts you don’t believe you owe, there are a few things you can do, as outlined in an article by Colleen Tressler, a consumer education specialist for the FTC, published in August of 2017.

First, don’t assume that just because someone has personal information – including your Social Security number, bank account numbers or names of relatives – that they’re legitimate. Many of these “phantom debt” collectors will impersonate law firms. The FTC charged a collection firm in North Carolina of doing just that in 2017.

Also, understand that you cannot be arrested for failure to pay a bill, so if someone is threatening you with jail time, chances are excellent that they are not legitimate.

As Tressler notes, by law, debt collectors must send you a written document, or “validation notice,” outlining how much you owe and to whom you owe it within five days of making initial contact. If they don’t, that is also a big warning sign.

Finally, if you’re being harassed by debt collectors (even for legitimate debts) with threats of jail time, you can contact your local Better Business Bureau. You can also fill out a complaint form with the FTC.  And for good measure, you  may also want to contact whatever government agency in your state handles consumer affairs and fraud. Frequently, this will be through your state attorney general’s office.

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