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  • Imagine you're running a small business.

  • You borrow some money.

  • You're paying it back.

  • Maybe you've fallen behind, maybe you haven't.

  • And then one day out of the blue,

  • you can't get any of your money out of the bank.

  • Your accounts are locked up.

  • They've been seized without any notice to you.

  • This is happening to small business people

  • across America every day.

  • And it's enabled by an obscure document

  • called a confession of judgment.

  • It just kept getting worse, there was no money left.

  • I was ready to take my life to clear everybody else.

  • I'm Zach Mider, I'm a reporter at Bloomberg News.

  • I'm Zeke Faux, I'm a reporter for Bloomberg News

  • and Business Week Magazine.

  • And we're the ones who wrote

  • Sign Here to Lose Everything.

  • This is an extraordinary period for America's economy.

  • We've seen triple digit swings in the stock market.

  • Major financial institutions have teetered

  • on the edge of collapse and some have failed.

  • After the financial crisis a decade ago,

  • a lot of small businesses needed loans

  • and they couldn't always get them from traditional banks.

  • Instead people who stepped in were called

  • cash advance companies.

  • These guys call businesses across the country

  • and they're offering quick money and they say that

  • if you're in tight spot they can get you 50, a hundred

  • grand overnight.

  • The loans are very expensive, with interest rates as high as

  • 300 or 500 percent annualized.

  • That's 20 times as much as you'd pay on a credit card.

  • The merchant cash advance industry has attracted

  • all sorts of characters because of the potential

  • to make a quick profit.

  • So there are cash advance brokers with convictions for

  • drug smuggling, stock fraud.

  • If you go and talk to someone in the shady side

  • of Wall Street, the odds are, they either work

  • in cash advance, or they've considered it.

  • One of the biggest companies

  • in the cash advance space is Yellowstone Capital

  • and it was actually founded by this guy David Glass.

  • I didn't get to where I am today

  • by losing my client's money.

  • Glass actually served as the inspiration

  • for the classic stock scam movie Boiler Room.

  • You call me when the stock doubles alright?

  • Glass heard about this cash advance boom

  • and started Yellowstone.

  • And it quickly grew to be one of the biggest

  • cash advance brokerages.

  • They're lending to small businesses.

  • Picture like a plumber, an electrician, or a shopkeeper.

  • But they realize quickly that some businesses

  • were taking loans and then just

  • stealing the money essentially.

  • Like they had no intention of paying it back.

  • So a lawyer, working for Yellowstone and some other

  • cash advance companies, had an idea that they could revive

  • this age old practice called confessions of judgment.

  • A confession of judgment is something

  • that the borrower signs as a condition of getting the loan.

  • It basically means they give up their right

  • to be heard in court.

  • So later on if they miss a payment,

  • or even if the lender wants to claim they missed a payment,

  • it doesn't have to be true, the lender can go to court

  • with this confession of judgment, which gives them the power

  • to raid the borrower's bank account.

  • Confessions of judgment aren't even valid in many states.

  • But New York state law allows this practice.

  • The borrowers are all across the country.

  • Cleveland, or Topeka, Kansas, or Los Angeles,

  • but typically they're all required to sign

  • a confession of judgment that's valid in a New York court.

  • When you stop and think about it,

  • it's crazy that a borrower would admit in advance

  • to not paying back a loan, when they haven't even

  • received the money yet.

  • It was so illogical, I really wanted to know more.

  • We thought about, uh maybe we should do a story,

  • but we didn't have a sense of the scale.

  • Like is this something that's used a lot?

  • And we ultimately found like more than 25,000

  • of these judgments filed in the last coupla years.

  • They were being used to go after borrowers

  • all over the country.

  • And Yellowstone was filing these things

  • at a rate of like several a day.

  • This system has no safeguards.

  • We found lots of borrowers who said that

  • confessions of judgment were filed against them

  • when it was not warranted, or the cash advance company

  • seized more money than they were owed.

  • We found, after talking to borrowers, that a lot of them

  • had had their lives turned upside down

  • by confessions of judgment.

  • My name is Jerry Bush, Jr., I basically was a plumber

  • for about 30 years.

  • Jerry Bush ran a plumbing business with his father,

  • near Roanoke, Virginia.

  • And the company got a lot of jobs,

  • but he had cash flow problems

  • and he started taking these cash advances.

  • The confession of judgment that was part of the contract

  • that you had to sign and they have very high interest rates,

  • but we needed money.

  • So he kept taking more and more of these loans

  • in order to get the money to pay the loans he already had.

  • It got to be so bad that he was paying back $18,000 a day

  • at one point.

  • So I hada close doors because there was no way

  • I could make the payments.

  • The way these contracts work, the cash advance companies

  • shouldn't be able to go after someone to collect

  • if their business fails.

  • But because Jerry had signed these confessions of judgment

  • the cash advance companies went after him.

  • They got my father's retirement money.

  • They took it out of my son's account, which he was 17,

  • but they said my name was on the account.

  • So they took all his savings.

  • I kept gettin' calls.

  • One funding company told me, he said you have two ways out.

  • Win a lottery, or die.

  • I took the chance and I was ready to take my life

  • to clear everybody else.

  • He took a lot of pain pills, walked out into the woods

  • near his house and recorded a video in which he said goodbye

  • to his son and wife.

  • They found him and took him to the hospital.

  • I'm survivin' every day.

  • My hope is that they will stop these

  • confessions of judgments.

  • I write to senators, Congress, almost every week

  • and I'm just hopin' we can get some laws passed.

  • After we filed the story in November of 2018,

  • we got quite a lot of response from government officials.

  • On the federal level, members of Congress in both chambers

  • have filed legislation to end the practice of

  • confession of judgment nationwide.

  • In New York, the state Attorney General has opened

  • an investigation and among the companies they're looking at

  • are Yellowstone Capital.

  • This is a story that needed a light shone on it actively

  • by the press.

  • If we hadn't published it when we did, you wouldn't see

  • the official reaction that you see now.

  • But while that's going on, people are still having

  • confessions of judgment filed against them everyday.

  • If you look up Yellowstone Capital, you can see their

  • salesmen on Instagram posting pictures of their

  • Lamborghinis, diamond watches, fancy vacations,

  • so they seem to be doing great.

  • Even if confessions of judgment go away,

  • there are all kinds of other abusive practices

  • in the cash advance industry.

  • From brokers signing customers up for loans

  • they don't really want, to lenders tryin' to collect money

  • they were never owed.

  • So you're probably gonna be hearing more about this industry

  • for years to come.

Imagine you're running a small business.

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    林宜悉 に公開 2021 年 01 月 14 日
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