Why Are Churches Taking Out Merchant Cash Advances? FTC Bans RAM Capital Funding.

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 merchant cash advance and debt collection industries, and required to pay $675,000 to settle Federal Trade Commission charges that they used deceptive and illegal means to seize assets from small businesses, non-profits, and religious organizations.

“Today’s order makes clear that preying on small businesses will come with a heavy price,” said Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection. “These defendants have been banned from the merchant cash advance business, and we intend to hold their co-defendants similarly accountable.”

Merchant cash advances are a type of alternative small business financing. Generally speaking, merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses’ revenue. Typically, a merchant cash advance company will make daily withdrawals from the business’s bank account until the obligation has been met.

As detailed in the February 2020 FTC staff perspective on the “Strictly Business” forum, however, some merchant cash advance providers engage in aggressive, and potentially misleading, marketing practices and use potentially abusive collection tactics.

The FTC alleged that since 2015, the defendants deceived small businesses and other organizations in violation of the FTC Act and the Gramm-Leach-Bliley Act by requiring personal guarantees and upfront fees from consumers after representing they wouldn’t make these demands, providing less funding to consumers than promised, and by debiting more from consumers’ bank accounts than they said they would.

The agency also alleged that the defendants made unauthorized withdrawals from consumers’ accounts and used unfair collection practices, including sometimes threatening physical violence. In addition, the FTC alleged that the defendants illegally weaponized “confessions of judgment,” contractual terms that allowed defendants to pursue customers’ personal assets in court and obtain uncontested judgments against them.

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As part of the settlement, the defendants are being ordered to vacate any judgments against their former customers and to release any liens against their customers’ property. The proposed order would also ban these defendants from making these and similar misrepresentations, and from further violations of the Gramm-Leach-Bliley Act.

The Commission’s case against the other defendants, RCG Advances, LLC, Robert Giardina, and Jonathan Braun, is ongoing, and the proposed order requires settling defendants RAM Capital Funding and Reich to cooperate with the FTC. – Source

Steve Rhode

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