Legal NewsLine posted a story that caught my eye. The article said, “A fast-growing small business financing company in Boston has filed a federal lawsuit against two debt elimination companies, alleging they are scamming merchants and commercial businesses and, in turn, have damaged the plaintiff company.”
It’s an interesting turn of events in the business debt settlement niche of the debt relief industry.
Forward Financing is taking a very aggressive stance against two business debt settlement companies named in the suit. The complaint specifically names Mark D. Guidubaldi & Associates, doing business as Protection Legal Group, and Corporate Bailout.
Protection Legal Group is said to operate out of Schaumburg, Illinois and Corporate Bailout is located in Somerville, New Jersey.
Forward Financing states, “Defendants PLG and Corporate Bailout have carried out their own version of this scheme, aimed not at consumers but at merchants and other commercial businesses. Scouring public records for UCC-1 Financing Statements, among other methods, the Defendants identify and solicit merchants and other commercial entities to enroll in a “Debt Restructure Program” or similarly labeled program, promising to significantly reduce the merchants’ debts or other obligations. In fact, the Defendants’ “programs” are shams, empty promises with no basis in law or fact designed not to assist these merchants but to exploit the merchants’ vulnerabilities and take their money for the Defendants’ own benefit – at the expense of the merchants’ creditors and business associates.”
The complaint brings to light that customers of Forward Financing, which purchases future receipts and receivables, has a clause in their agreement with the merchant that states the merchant may not, “enter into any agreement with a third party that offers debt restructuring services, debt settlement services, debt management services, debt balance reduction services, creditor reduction services, creditor negotiation services, financial mitigation services, or similar services.”
It seems Forward Financing is taking a proactive step to block merchants from third party debt assistance services. It is unclear if the clauses in the merchant agreements would prevent the use of a licensed attorney in the state the business is located in to act as a third party.
But to even amp up the resistance of business debt settlement companies entering the picture, the complaint states customers of Forward Financing, “Moreover, a merchant is required to notify the Plaintiff within 24 hours of receiving a solicitation from such a service provider, and to provide Plaintiff with copies of any written material provided by the third party to the merchant.”
Forward Financing provides some very specific examples of clients and companies that have deviated from the contracted relationship. The complaint states:
“For example, on July 15, 2016, Plaintiff executed a Future Receipts Sales Agreement with merchant National Security, LLC, of McAllen, Texas. Pursuant to the agreement, Plaintiff provided National Security with a cash advance of $22,000, and in return Plaintiff purchased future receivables valued at $30,800. To collect its purchased future receipts, Plaintiff received daily payments from National Security’s account through August 26, 2016. Four days later, on August 30, 2016, National Security signed a power of attorney with PLG. Subsequently, PLG directed National Security to make no further to Plaintiff pursuant to the Agreement, and the merchant ceased communication with Plaintiff, referring all inquiries to PLG.
In a similar manner, PLG and Corporate Bailout have interfered with Plaintiff’s contracts with other merchants, including but not limited to: Port City Logistics, Inc., of Oswego, N.Y.; BW CPA Group, Inc., of Los Angeles, Cal.; J&J Pool and Beach Services, Inc., of Pembroke Pines, Fla.; Troupe Eyecare, LLC, of Fort Worth, Tex.; Scarpinato’s Cucina & Catering of Blackwood, N.J.; and Courageous Journeys Counseling Services, PC, of Yuma, Ariz.
Each of these merchants received cash advances from Plaintiff in amounts ranging from $10,000 to $100,000, and subsequently ceased making payments to Plaintiff within 90 days of receiving the cash advances – and after being solicited to enroll in a Defendant’s “Debt Restructure Program.”
Prior to soliciting each of these merchants to sign up for their sham services, PLG and Corporate Bailout had no relationship with any of them. Case 1:16-cv-12406-LTS Document 1
Under the guise of providing debt mitigation services, the Defendants directed each of the merchants named above to cease their required payments and direct all inquiries from Plaintiff to Defendants. The Defendants also directed these merchants to transfer Plaintiff’s payments to the Defendants themselves.
However, in each of these cases, PLG and Corporate Bailout have not articulated any legal justification for their interference with these contracts, or identified any legal defects in the Future Receipts Sales Agreements. In fact, there is no legal basis for any of these merchants to discontinue their payments to Plaintiff pursuant to their respective Agreements. In essence, Defendants have simply taken Plaintiff’s assets as a hostage, and demanded a discount in exchange for their release.
PLG engages these merchants under an agreement under which PLG offers to assist the merchants through a “Debt Restructure Program” – despite the fact that the merchants’ agreements with Plaintiff do not constitute loans or debts. Upon information and belief, Corporate Bailout engages merchants through a similar program.
The Defendants promised these merchants that they could erase their debts and otherwise alleviate their financial problems by convincing creditors – or, in the case of Plaintiff, purchasers of receivables – to accept a significantly reduced amount as payment in full for their clients’ debts or financial obligations, irrespective of the fact that the Defendants’ actions and the merchants they purportedly advise have no legal basis.
For their “services,” the Defendants receive fees of 25 percent or more of the debts or other obligations that a merchant placed in the Defendants’ programs, plus monthly “retainer” and “administration” fees. As a result of the Defendants’ scheme, the merchants described above paid thousands of dollars to the Defendants – money that the merchants believed would be forwarded, at least in part, to the Plaintiff or other creditors. Instead, the Defendants diverted this money to themselves – including funds from receivables belonging to Plaintiff.
As a result of the Defendants’ misconduct, the merchants have received nothing of value – and Plaintiff has been injured.”
It will be very interesting to see what the outcome is in this case since if Forward Financing would prevail it could create future issues for merchants to be aware of when entering agreements which may block access to outside debt advice or assistance.
It may be just coincidence but I noticed that an attorney also named Mark D. Guidubaldi once represented Legal Helpers Debt Resolution and alleged two other debt relief companies were moving in on their territory or interfereing with the relationship with their customers.
You can read the full complaint below.
But this does not appear to be the only ongoing case Protection Legal Group is dealing with. On November 15, 2016 an amended complaint was filed against them by Complete Business Solutions Group, also known as Fast Advance Funding.
The defendants in this case are Mark D. Guidubaldi & Associates, Protection Legal Group, Corporate Bailout, Sanford J. Feder, Esq. and Mark D. Guidubaldi, Esq.
This complaint alleges Protection Legal Group was formerly Jason Blust & Associates and was purchased by Guidubaldi on May 19, 2016. It also states Protection Legal Group is an unregistered law firm with the Illinois Supreme Court.
This complaint makes similar statements regarding the business model of Fast Advance Funding and says the funding company in mid-July 2016 “began to receive a number of Power of Attorney documents executed by Merchants granting Power of Attorney to “Protection Legal Group, LLC.”
You can read the full complaint below.
What is interesting is the Protection Legal Group cover letter to Fast Advance Funding uses an address of 331 Newman Springs Rd, #143, Red Bank, NJ 07701.
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