AG sues merchant cash advance companies for “cheating” millions of businesses – Commercial Observer
New York Attorney General Letitia james announced yesterday that it is suing three merchant cash advance companies for allegedly lending money to small businesses at “astronomically high interest rates”, charging undisclosed fees, withdrawing “amounts surplus ‘from customers’ bank accounts and wringing money judgments from businesses by filing false affidavits in court.
Three companies, Richmond Capital Group, RAM capital financing and Financing of the viceroy, were named in the lawsuit filed Wednesday in the Manhattan Supreme Court. The lawsuit, which resulted from an 18-month investigation, refers to them collectively as the “Richmond Companies”. The attorney general also alleges that Ram and Richmond “harassed and threatened the traders with violence and legal action, in an attempt to force them to repay the loans.”
the Federal Trade Commission also filed a separate lawsuit against the Richmond companies in federal court on Wednesday, for “misrepresenting its financial products, unfairly using admissions of judgment, making unfair collection threats and making unauthorized withdrawals from accounts merchant banking ”.
Four individuals affiliated with the companies were also named in the lawsuits: Robert giardina, owner of Richmond and Viceroy, Tzvi “Steve” Reich, owner of Ram, and Michelle gregg, administrator of Richmond and Viceroy, and Jonathan braun, who worked closely with the three to lead the operations of cash advances to merchants across all businesses.
The trio of companies have reportedly issued more than 3,000 loans at illegally high interest rates since 2015 and collected $ 77 million in payments on those loans, according to the attorney general’s office.
Cash advances to traders are basically payday loans for small businesses that don’t have the capital or credit to secure a traditional small business loan. These are short-term, high-interest loans that businesses repay based on a percentage of their daily credit card payment income.
The state caps the annual interest rate on these loans at 16 percent, and James’ office says these companies charge 200 to 100 percent interest. Richmond companies would withdraw a set amount from a business account – from $ 149 to $ 14,999 – daily over short repayment periods, often 60 days or less. In one case, businesses recovered the repayment of a $ 10,000 loan by withdrawing $ 19,990 from a small business‘s merchant account over a ten-day period. This equates to a staggering 4,000% annual interest rate.
Braun, who works for Richmond Companies, threatened a number of small business owners who informed the lender that they would not be able to make their loan repayments, according to the lawsuit.
He would have asked Michael pennington, the owner of Bionicle Plumbing, “Why don’t you pay me, you redneck shit?” With just one phone call. In another, he threatened Pennington: “Be thankful that you are not in New York, because your family would find you floating in the Hudson. “
He also reportedly told the former president of a Jewish religious organization that he “would come over there and beat you up at 770 Eastern Parkway.”
The attorney general opened an investigation into Braun and his employers after Bloomberg published an article about him that highlighted his unorthodox collection methods and his record as a convicted marijuana smuggler.
James said in a statement that it was “unreasonable that these modern day loan sharks not only prey on hard-working business owners with bogus loans, but threaten violence and kidnapping. Although small companies don’t always have the tools to protect themselves from unscrupulous actors, my office is determined to use every tool at its disposal to protect small businesses from these illegal scammers, and will fight to get every penny back.