In what may be the beginning of the long-overdue crackdown on Merchant Cash Advance Provider abusive lending tactics, on August 03, 2020, the Federal Trade Commission ("FTC") filed a complaint against MCA Provider Yellowstone Capital, LLC, alleging that Yellowstone engaged in misrepresentation to borrowers that there would be no "personal guarantee", misrepresentation as to the amount financed, and also for "unauthorized" withdrawals from merchants' bank accounts.
The FTC Complaint and Exhibits can be found here
Interestingly, only a little less than 2 years ago, Yellowstone was brazen enough to conduct a strategy of suing debt settlement companies, now Yellowstone faces a lawsuit from the FTC that places its "business" in jeopardy
However, the MCA mouthpiece deBanked does have a running article on some debt settlement companies and their questionable tactics, the story can be found here, and links to related stories can be found below the main article. The story does provide a warning that you should be very careful who you hire to settle debts. As a law firm, we are not a "debt settlement company", but rather a legal advocate to help you negotiate and or restructure your outstanding business debt, and potentially add leverage to do so by informing your MCA or high-interest business lender that if negotiations break down we are fully prepared to defend any lawsuit or file one on behalf of you, the merchant.
Further, Section 1071 of the Dodd-Frank Act set in motion reporting requirements regarding small business loans. However, not much traction has taken place in Section 1071 since its inception back in 2010. The mouthpiece for the MCA industry (DeBanked) actually bragged in January of 2020, that "it may take years for this section to be activated", see article here
Director Kraninger's Speech at CFPB Symposium on Section 1071 of the Dodd-Frank Act - November 26, 2019
Applying efforts in her home state at a national level, U.S. Rep. Nydia M. Velázquez of New York recently introduced H.R. H.R. 7889, the Small Business Lending Disclosure and Broker Regulation Act, to extend some of the safeguards available to consumer borrowers to those seeking business credit.
Under Representative Velázquez’s bill, the Consumer Financial Protection Bureau (CFPB) would be granted the same oversight authority with respect to small business financing as the agency has with respect to consumer financial products and services. Moreover, small business lenders would need to make additional information readily available to borrowers including the annual percentage rate; financing charges for loans; loan terms; payment amounts, and collateral requirements.
The FBI also recently raided the Philadelphia offices of Complete Business Solutions Group, a/k/a/ PAR Funding, and shut that business down for defrauding the investors that provided the funds to be used for MCA loans provided to businesses.. PAR funding was also subject to a Bloomberg News expose' series of articles last fall, which brought to light the abusive tactics of this criminal organization. see a Washington Post story on PAR being shutdown here
See The SEC lawsuit against PAR Funding here
See the NBC News Video about MCA Loans and PAR Funding being shut down here
"It almost seems like it is a gangster operation," said one California gym owner, who said his lender PAR threatened to ask his clients to repay his debts.
FTC official: Legal 'loan sharks' may be exploiting coronavirus to squeeze small businesses - NBC News April 03, 2020
"Small businesses have borrowed billions from unregulated merchant cash advance companies. Now, amid the coronavirus crisis, the lenders have come for their money."
Par Funding Says Federal Regulators Pose The Real Threat To Investors, The SEC Rejects That -
Philadelphia Inquirer - August 21, 2020
The light is finally being shown upon the abusive lending tactics by these usurious business payday loan MCA providers. The above actions by the federal government have now brought these unregulated entities into the spotlight, where mainstream federal protections can now be provided to small business borrowers.
The FTC lawsuit against Yellowstone Capital may provide the basis to seek damages for abusive and deceptive acts by your MCA or high-interest small loan provider, and this case is worth monitoring very closely.
We are one of the few, if only firms, in the New England area with experience in defending these criminally usurious MCA "loans"..
There are also MCA providers (such as Forward Financing, LLC) in which the MCA Borrower contract specifies that the law of Massachusetts controls the terms of the agreement and that any litigation or arbitration takes place in Massachusetts. In those situations, no matter where your business is located we can help negotiate, and or defend against abusive collection attempts from these insidious MCA "funders". We are also licensed to practice law in Connecticut as well.
Please see our Facebook page, where we try to post the most recent articles on MCA news
Please also see our previous blog post about MCA Abuses
If you are having difficulty in making payments under a Merchant Cash Advance, or small business loan, please contact us to discuss your options. Unlike a debt settlement company, we are a law firm that can and will defend any lawsuit brought against you, and/or file one on your behalf if the situation calls for that.
Don't accept the situation as hopeless, there may be a solution to your debt situation, and it is worth submitting a contact form on this website or email to russ45esq@gmail.com, or to call to us, in order to discuss your options.
I truly hope that this finds you healthy, and please stay safe
Sincerely,
Glenn F. Russell, Jr.