FTC Alleges New York Small-Business Lenders Deceived SMBs And Nonprofits

The Federal Trade Commission sued two New York small-business lenders Wednesday (June 10) for allegedly using deceptive terms in loans to companies, nonprofits, religious groups and medical offices, and threatening violence and personal-asset seizures to collect funds.

The FTC filed a complaint against RCG Advance LLC, (formerly known as Richmond Capital Group LLC, doing business as Viceroy Capital Funding) and Ram Capital Funding, along with some of the company’s alleged principals.

RCG Advance LLC could not be reached for comment, while messages left with Ram Capital Funding seeking comment were not immediately returned.

In its lawsuit, the FTC alleged that since at least 2015, the defendants deceived clients by misrepresenting the terms of loans provided.

For example, the agency said in a statement the defendants’ web sites falsely claimed that their loans required “no personal guaranty of collateral from business owners.” In other words, customers obtaining financing on behalf of their companies would not have their personal possessions treated as loan collateral.

But the FTC alleged that contracts did in fact include such provisions. Investigators also claimed that the defendants required businesses and their owners to sign “confessions of judgment” as part of their contracts. The FTC said these would allow the defendants to immediately go to court and obtain uncontested judgments in case of an alleged default.

The FTC also alleged that defendants made unauthorized withdrawals from consumers’ bank accounts. Additionally, the agency claimed that the firms used unfair collection practices — including threatening to break a customer’s jaw and “come down there and beat the s**t out of you.” — to compel them to pay.

A 14-page complaint filed in the U.S. District Court for the Southern District of New York further alleged that the defendants made threatening calls to consumers. That reputedly included threatening to ruin one customer’s reputation by falsely accusing him of being a child molester.

The agency also claimed defendants failed to deliver the full amount of financing promised by withholding an array of upfront fees despite promising “no upfront costs” on their Web site. The fees ranged from hundreds to tens of thousands of dollars and were either poorly disclosed in contracts or not disclosed at all, the government claimed.

“Consumers are suffering, have suffered, and will continue to suffer substantial injury as a result of defendants’ violations of the FTC Act,” FTC lawyers wrote in court papers. “In addition, defendants have been unjustly enriched as a result of their unlawful acts or practices. Absent injunctive relief by this court, defendants are likely to continue to injure consumers, reap unjust enrichment, and harm the public interest.”

The lawsuit seeks a permanent injunction to halt the defendants from any violations of the FTC Act. It also asks the court to order “rescission or reformation of contracts, restitution, the refund of monies paid, and the disgorgement of ill-gotten monies; and award Plaintiff the costs of bringing this action, as well as such other and additional relief as the court may determine to be just and proper.”