B2B Payments

Suit Filed Against Merchant Cash Advance Companies For Fraud

Three merchant cash advance companies are facing a lawsuit from New York Attorney General Letitia James over reportedly practicing illicit measures when loaning money to clients, according to a press release.

The three companies charged are Richmond Capital Group, Ram Capital Funding and Viceroy Capital Funding. They are accused of charging “astronomically-high interest rates” on loans, charging undisclosed fees, withdrawing too much from clients’ bank accounts, and filing false court affidavits as a means to extract money judgments.

This comes after a separate lawsuit filed by the Federal Trade Commission (FTC) last week against the same defendants.

The newest lawsuit was filed in Manhattan Supreme Court on Wednesday last week (June 10) and was the result of 18 months of investigation. There were four individuals also named in the suit: Richmond and Viceroy owner Robert Giardina and director Michelle Gregg, Ram owner Tzvi “Steve” Reich and Jonathan Braun, who worked with the other three in merchant cash advance operations in all the companies.

The investigation was spurred by a Bloomberg piece exposing Braun’s reported methods of collections and his record as a convicted marijuana smuggler.

According to Commercial Observer, James also alleged that the companies were using violent threats and the threat of legal action to get clients to pay their debts. In one case, Braun allegedly threatened Bionicle Plumbing owner Michael Pennington by saying his family would have found him “floating in the Hudson” if he’d been home in New York. In another, Braun allegedly threatened the leader of a Jewish religious organization that he would “come down and beat the [expletive] out of you.”

Together, they collected around $77 million in payments on loans with criminally high interest rates since 2015, the suit said, and James said in the release that it was “unconscionable that these modern-day loan sharks not only preyed on hardworking business owners with fake loans, but threatened violence and kidnapping.”

“While small businesses may not 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 fraudsters, and will fight to get every penny back,” James said in the release.

Scrutiny against merchant lending companies has grown as of late, with the FTC looking into the industry as a whole last year. The FTC said its concerns had to do with the lack of scrutiny on the industry, and the potentially unfair contract terms small- to medium-sized businesses (SMBs) faced as a result.


New PYMNTS Report: The CFO’s Guide To Digitizing B2B Payments – August 2020 

The CFO’s Guide To Digitizing B2B Payments, a PYMNTS and Comdata collaboration, examines how companies are updating their AP approaches to protect their cash flows, support their vendors and enable their financial departments to operate remotely.