WASHINGTON–The Federal Trade Commission has taken action against two New York-based companies engaged in small-business financing, along with several of their owners and officers, alleging the companies threatened to break one person’s jaw and accuse another of being a child molester, if the borrowers did not pay.
Separately, the FTC also announced a settlement with Kohl’s department stores following allegations it violated the Fair Credit Reporting Act (FCRA) by refusing to provide complete records of transactions to consumers whose personal information was used by identity thieves.
The allegations against the New York lenders allege the companies used other deceptions and threats to seize personal and business assets from small businesses, non-profits, religious organizations, and medical offices.
The FTC filed a complaint against RCG Advances, LLC—formerly known as Richmond Capital Group, LLC, and also doing business as Viceroy Capital Funding and Ram Capital Funding—and a related entity and individuals. The complaint alleges that, since at least 2015, the defendants have deceived small businesses and other organizations by misrepresenting the terms of merchant cash advances they provided, and then used unfair collection practices, including sometimes threatening physical violence, to compel consumers to pay. The FTC also has alleged that defendants have made unauthorized withdrawals from consumers’ accounts.
False Claims
“The defendants’ websites falsely claim that their cash advances require ‘no personal guaranty of collateral from business owners,’ meaning that the people obtaining financing on behalf of companies would not have their personal possessions treated as collateral in the transaction. In fact, their contracts did include such provisions,” the FTC stated. “The defendants also require businesses and their owners to sign confessions of judgment as part of their contracts, which allow the defendants to go immediately to court and obtain an uncontested judgment in case of an alleged default.”
The complaint further alleges the defendants unlawfully and unfairly use these confessions of judgment to seize consumer personal and business assets, in circumstances not expected by consumers and not permitted by the defendants’ financing contracts. The complaint alleges that the defendants make threatening calls to consumers, including telling one consumer that they would “break his jaw” if he did not make his payments and, in another case, threatening to ruin a consumer’s reputation by falsely accusing him of being a child molester, if he did not pay.
According to the FTC, defendants also fail to deliver the full amount of financing promised by withholding an array of upfront fees from the funds they deliver to customers, despite promising “no upfront costs” on their website, the FTC has alleged. The fees can range from hundreds to tens of thousands of dollars, and are either poorly disclosed in contracts or not disclosed at all. The complaint further cites internal company emails showing the defendants directing their agents to charge higher fees to consumers than allowed by the contract.
The FTC’s complaint names as defendants RCG Advances, LLC (formerly known as Richmond Capital Group, LLC and also doing business as Viceroy Capital Funding and Ram Capital Funding); Ram Capital Funding LLC; Robert L. Giardina; Jonathan Braun, and Tzvi Reich.
Settlement With Kohls
Separately, Kohl’s Department Stores, Inc. has agreed to pay a civil penalty of $220,000 to settle Federal Trade Commission allegations that it violated the Fair Credit Reporting Act (FCRA) by refusing to provide complete records of transactions to consumers whose personal information was used by identity thieves.
In a complaint filed by the Department of Justice on behalf of the FTC, the Commission that alleged Kohl’s refused to provide information identifying the thieves to identity theft victims, despite the fact that the FCRA guarantees victims access to this information. The FTC also alleged the company failed to provide the information within 30 days, as required by the FCRA. The information sought by identity theft victims included records of sales made by the identity thieves using stolen personal information, along with the perpetrator’s name and contact information.
“If someone stole your identity, it’s your right to get the records related to the theft – and that’s a right the FTC takes seriously,” said Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, in a statement. “This case is a warning to other companies: We will hold you responsible if you fail to give identity theft victims the required business records.”
Additional Requirement
In addition to the civil penalty, Kohl’s is required to provide identity theft victims, who provide valid verification of their identity and the identity theft, with access to business transaction records related to the theft within 30 days. The company also must post a notice on its website informing identity theft victims about how to obtain records related to identify theft, and certify that it has reached out to victims who were unlawfully denied access to such records in the past.