Two of the defendants behind an alleged small business financing scheme, RAM Capital Funding, LLC and its owner Tzvi Reich, will be permanently banned from the cash advance and debt collection industries, and will be required to pay $ 675,000 to settle the Federal Trade Commission fees they used deceptive and illegal means to seize the assets of small businesses, nonprofits and religious organizations.
“Today’s order is a clear signal that attacking small businesses will come at a high price,” said Samuel Levine, director of the FTC’s Office of Consumer Protection. “These defendants have been banned from the merchant cash advance market, and we intend to hold their co-defendants accountable in the same way.”
Cash advances to merchants are a type of alternative financing for small businesses. Typically, merchant cash advance companies provide funds to businesses in exchange for a percentage of business income. Typically, a merchant cash advance company will make daily withdrawals from the company’s bank account until the obligation is fulfilled.
As detailed in the February 2020 FTC Staff Viewpoint on the “Strictly Business” forum, however, some merchant cash advance providers engage in aggressive and potentially deceptive marketing practices and employ marketing tactics. potentially abusive recovery.
The FTC has alleged that since 2015, defendants have deceived small businesses and other organizations in violation of the FTC and Gramm-Leach-Bliley Acts by demanding personal guarantees and upfront fees from consumers after claiming they would not make those demands, providing less financing to consumers than promised, and debiting more consumers’ bank accounts than they promised.
The agency also alleged that the defendants made unauthorized withdrawals from consumer accounts and used unfair collection practices, including threats of physical violence. Further, the FTC alleged that the defendants unlawfully used “admissions of judgment,” contractual terms that allowed defendants to sue clients’ personal property in court and obtain unchallenged judgments against them.
As part of the settlement, the defendants are ordered to set aside any judgment against their former clients and to release any lien on the property of their clients. The proposed order would also prohibit such defendants from making these and similar misrepresentations, and other violations of the Gramm-Leach-Bliley Act.
The Commission’s case against the other defendants, RCG Advances, LLC, Robert Giardina and Jonathan Braun, is pending, and the proposed order requires a settlement from defendants RAM Capital Funding and Reich to cooperate with the FTC.
The Commission vote approving the stipulated final order was 4-0. The FTC filed the draft order in the United States District Court for the Southern District of New York.
REMARK: Final stipulated orders or injunctions, etc. have the force of law when approved and signed by the judge of the district court.