
A debt-collection machine that’s chewing up small businesses across America - acdanger
https://www.bloomberg.com/graphics/2018-confessions-of-judgment/
======
nlh
This is without question an absolutely miserable practice, and I predict NYS
will take quick action to curtail it - this is the sort of bad PR that very
often moves the NYS government into actual positive action. This whole
industry seems to have hidden in the shadows, and I hope NYS fixes it.

That being said - one thing stands out, as it often does with this sort of
story. There's often a turning point that should make any one of us scratch
our heads and learn for the future. This was it for me:

"The Duncans’ ordeal began in November 2017 with an unsolicited fax from a
broker promising term loans of as much as $1 million at a cheap rate...The
spam fax felt like a gift from God."

That's the moment right there that should scream RED FLAG RED FLAG RED FLAG to
everyone. Spam never delivers a gift from the heavens. Never. Never. Never.
This is the same sort of thing that 409 scammers bank on -- desperate folks
that think they're just the luckiest darn people on earth for happening to get
this great deal right at their feet. This is not how the world works.

It goes on...

"Without talking to a lawyer, they did. Why not? Doug thought. They intended
to pay the money back on time."

Red Flag #2.

"This would continue for about three months, until they’d repaid $59,960,
amounting to an annualized interest rate of more than 350 percent. A small
price to pay, Doug figured—soon he’d have all the money he needed in cheaper,
longer-term debt."

And again...

I'm not blaming the Duncans here entirely, but this situation was avoidable. I
hope everyone here on HN reads this tale and learns from it for your own
businesses / life experiences.

~~~
pm90
Can we just say "Darwins law" and let it be?

In all seriousness... how do you protect naive people from scams like this? I
guess my despair is that: you might protect them from this obvious scam. What
if the scam is a little more polished?

I think this kinda thing will always happen to gullible folks. I'm not sure
what the solution is.

~~~
PurpleBoxDragon
>Can we just say "Darwins law" and let it be?

Only if we are willing to say the same once someone decides to fight back with
actual force. If someone outright kills a scammer doing this, are you willing
to write it off as "Darwin's law" and let it be?

~~~
travisoneill1
Wouldn't bother me too much.

------
grellas
This article describes what is essentially a scam operation, dressed up in
legal garb, aimed at exploiting desperate borrowers looking for short-term
funds to help fund their business operations.

No one signs up to a loan charging 350% annual interest who is not desperate.

No doubt the arrangement is structured in a way that also circumvents usury
laws of various jurisdictions.

The confession of judgment form is an integral part of the abuse inflicted on
borrowers here. This is indeed a long-standing legal vehicle, perfectly legal
in itself, by which a lender can go to court and get an ex-parte judgment
(that is, a judgment following an application process by which only one party
appears and no one is there to oppose the application or contest it in any
way) in highly expedited fashion. With a confession of judgment, actual review
by a judge is bypassed altogether in most cases and a clerk performs a
ministerial act to enter it. By ministerial, I mean that no one attempts to
evaluate anything other than to determine that the form itself is indeed a
confession of judgment and that is it signed by the party purporting to
confess judgment. Once such a judgment is entered, it has all the attributes
of any other judgment and can be used to seize assets and otherwise employ the
full range of means by which it can be enforced against a judgment debtor.

A confession of judgment can serve a legitimate purpose. Very often, when
litigation is settled, a party cannot pay a given amount in full but agrees
that he owes it and promises to pay it over time in installments as part of
the settlement. Rather than entering into a stipulated judgment that becomes
public record to document the debt, the parties will agree, in effect, to keep
it off the public record by signing both a formal settlement agreement and
also a confession of judgment providing that the debtor confesses judgment for
the full amount of the debt. The settlement agreement will in turn define the
conditions by which the confession of judgment may be filed and an actual
judgment obtained. Typical terms provide that it can in no case be filed as
long as payments under the arrangement are being timely made but can be filed
(either with no notice or with a very short notice) if the debtor defaults
under the arrangement (even then, any payments actually made must be credited
to reduce the amount of the balance that becomes part of any judgment). If the
debtor pays everything off in full and on time, then the confession of
judgment can never be filed or used in any manner. If someone tries to file it
and obtain a judgment contrary to the agreement, severe consequences follow to
punish the party abusing the process.

That sort of limited use is helpful in resolving disputes while limiting harm
to debtors who wind up having to sign such things. Attorneys are typically
involved who, in effect, assume fiduciary duties not to abuse the process. In
this sense, and for such uses, the confession of judgment is a tried, tested,
and useful part of our U.S. legal system. It goes back many decades, if not
centuries, in the English common law.

In contrast, what is described in this article makes a mockery of our legal
system. There you have a shady business that incorporates the confession of
judgment into _every loan_ as a matter of routine and effectively sets up a
process where even a minor missed payment can result in devastation and ruin
to a debtor with no notice, no opportunity to be heard, and no defense. When
you add to this their institutional practices of conveniently fabricating
evidence to justify use of the confession, you turn the full force of the law
against a hapless and defenseless debtor who innocently assumed that normal
loan rules would apply.

If this is technically legal under New York law (don't know), it is a practice
that can be banned by legislative action. There are all sorts of cases in
which a technically binding contract is nonetheless barred from enforcement
because it violates public policy. I suppose there may be arguments on the
lender's side to support this sort of practice but I can't imagine they would
be compelling. Time for lawmakers to apply a fix either by banning the
practice or, at the least, by requiring some strong form of disclosure of the
risks.

Of course, the real issue here is the problem with being a desperate borrower.
The more life experience I get, the more I am dismayed by how vile people can
sometimes be. It is truly depressing to watch.

------
aetherson
Ultimately, this is a consequence of out-of-control complexity in the legal
system in America (and, I think, in many other countries). The current status
quo is that in order to do many commonplace things, you will be required to
sign long, arcane legal documents that are difficult or impossible for people
without specialist knowledge to understand, and which in most cases you have
no real negotiating power to argue against.

And so people don't read them. You can't.

When my wife and I sat down to buy our first house, we planned to read every
document before signing it. The mobile notary they sent to our house was
aghast. He was like, "Uh, I guess if you want to try, I can leave these here
and try to come back in 8 hours or so, but obviously I will not stay here
while you read everything you sign." Even if we had read it, what are the odds
that we could've found some gotcha clause dressed up in weird language in that
mound of documents?

When the status quo is for people to sign documents that they have not fully
read or understood, things like this are going to happen.

There are a couple of solutions, neither of them perfect:

1\. We need lawyers-in-a-box that can protect us from the most outrageous
abuses. You should be able to point your smartphone at a Confession of
Judgment and your phone should make a big red X and say, "WARNING! This kind
of document is considered predatory! Exercise extreme caution before you sign
it!" (You should also be able to get one that would tell you that the non-
compete they want you to sign in California is not binding, that this contract
contains a mandatory arbitration clause, and other things like that).

2\. But that would only help a little bit. Ultimately, we would need to really
rework the legal code in ways that I think everyone is more than a little
uncomfortable with.

~~~
retromario
In Germany, the notary is actually required to read out loud the entire
contract and make sure each clause is clear, valid and understood by all
parties.

I always thought this was a stupid, overly expensive and bureaucratic process
when incorporating a company. However, for a house purchase contract it was
surprisingly useful (but still ridiculously expensive...notary costs here are
more or less a fixed percentage of the transaction worth).

~~~
kaiwen1
In the Philippines the notary _is_ the scam. Only lawyers can be notaries. The
lawyers association (the Bar) for each jurisdiction sets the fee. Any lawyer
caught charging lower than the standard fee is subject to sanctions. And
what's the fee? It's a percent of the value of the contract. For land sales
it's typically 2-3% in most jurisdictions. And of course, this scam hits the
poor the hardest. They get stuck paying these preposterous fees while the rich
just cut deals with the attorneys.

------
justboxing
> The lenders’ weapon of choice is an arcane legal document called a
> confession of judgment. Before borrowers get a loan, they have to sign a
> statement giving up their right to defend themselves if the lender takes
> them to court. It’s like an arbitration agreement, except the borrower
> always loses. Armed with a confession, a lender can, without proof, accuse
> borrowers of not paying and legally seize their assets before they know
> what’s happened.

This is nuts. It says "they HAVE TO sign a statement giving up their right to
defend themselves if the lender takes them to court." (capitalization is
mine).

Does anyone know if the borrower can refuse to sign and still get the loan?

Also why is this arcane clause still in the loan docs? And do mortgage loans
also have this?

~~~
zaroth
No reputable loan would have this kind of clause, and no one should ever even
consider signing such a thing.

It’s a testament to the miserable state of financial education, poor
regulation, and even a corrupt legal system that is willing to even entertain
such a document.

Allowing a document like this in court is like letting desperate people sell
their organs for cash. It stinks to high heavens, and it seems obvious there’s
plenty of fraud at Yellowstone for a decent honorable DA to bring down a
_hammer_ on these guys. But will they? Don’t hold your breath.

~~~
JimboOmega
We live in a world where arbitration clauses are expected, so what does that
tell you?

They start as one entity's predatory practice, but when they work in court,
they spread rapidly and become a standard that you simply have to deal with.

Edit: This is also a world where student date can never be discharged because
that's what the lenders wanted and they wrote the law.

~~~
metildaa
Like Personal Guarantees for getting a Merchant Account to accept credit
cards. Everyone but Stripe, Square & PayPal requires them.

~~~
BallinBige
is that correct? links?

~~~
mjevans
I looked in to this in general a couple years ago. At least that that time the
lending agencies that were NOT banks and actually HAD public statements as to
the terms/conditions being offered __ALL__ included that. You might just not
see them in Stripe/PayPal worded as such, but the liability is pushed entirely
on the seller.

This is where a contractual fulfillment tracking system would be useful, a
matter of public record as to whom is paying whom and if the other side(s) in
the transaction held up their end of the deal. The sort of thing that
witnesses would sign; like your bank, their bank, and regulatory organizations
(for some special or large value transactions).

------
russellbeattie
I'm sorry, but the fact is that _all_ lenders and banks are like this.

I once missed 3 payments in a row during the last _6 months_ of a five year
car loan (never missed any other payments). OK, not great, my bad (hey, I was
broke). The GMAC loan company then set The Machine in action. My car was
repossessed as one would expect. However, _everything_ was stacked against me
recovering the car: It was sent 100 miles away to be auctioned off, with any
amount of the loan not covered to still be owed by me. Yes, they could sell
the car for $10, and I'd owe the rest. To get the car back, I needed to pay
off the rest of the car loan in full, plus interest, plus penalties, plus
"storage" fees (per day - this really pissed me off), the city of Menlo Park
charged me with something as well because of the tow, and I had to get myself
out to Vacaville somehow and go to the regional distribution center with all
the paperwork to get the car.

This happens so infrequently, the people there were shocked when I showed up
(I had gotten a loan from a friend, and spent a week on the phone getting it
done before they auctioned the car). Standing in the line with all the dealers
looking for cheap cars at auction and repo men who just arrived with BMW's
they just stole (ahem, recovered) that morning. It was surreal. They had my
car in the middle of a sea of other repossessed vehicles parked bumper to
bumper. It took them an hour or so just to fish it out. All my possessions in
the car had been thrown away.

This doesn't compare to the horror stories from the subprime loan craziness,
nor the abuse in the article, but it just shows that when you take a loan, you
are at the mercy of the lender, and they are never merciful. They are normally
giant corporations who farm out the work to thousands of happy conspirators
who make a living from other people's misery, justifying it because the person
who took the loan must somehow deserve the treatment.

~~~
endorphone
I had a very similar experience. Cash flow issues during a desperate push to
market of a self-financed business. My car was surprise repossessed.

I quickly pulled the cash together (it was on the _cusp_ of a large payment
coming to me) to buy it out and pay penalties and encountered a very similar
experience to you. I immediately demanded to buy it out to be told I had to
wait until they "calculated the amount owing". This simple bit of arithmetic
took almost a week, during which they were charging me something to the tune
of $200 a day. Finally they gave me the pay out amount so I headed to the
fortified bunker where they keep the vehicles -- some gray building in an
industrial park surrounded by giant fences -- and an employee saw me so I said
I was there to see the guy who told me to come. He walked me into their
bullpen and when the guy realized who I was it was like they thought I was
going to shoot the place up. It was apparently a major security breach for
them, all while I could hear their lines of employees doing what sounded like
credit sales calls (I guess they multipurpose).

Every single penalty was grossly beyond any reasonable amount (every player in
this scheme wanted their pound of flesh), but I paid it all and got my SUV.
Found out later that one of the airbags mysteriously went missing during this
period.

They can get away with this because as a society we have a sort of moral
attitude about debt. A "they had it comin'" attitude that many people have,
until the system turns on them.

~~~
russellbeattie
Thanks so much for responding and sharing your story! "We have a sort of moral
attitude about debt," is spot on! So much so, I was a tentative sharing my
experience, afraid I'd get blasted for missing the payments in the first place
by people who've never had to deal with the system before. It really was an
eye-opening experience for me, and a window into what tens of thousands of
people deal with every year.

I forgot to mention I was broke because of my own self-financed startup as
well, which didn't work out. (It turns out, I'm a horrible business person.
Happily, I was able to sell the assets of the company to a BigCo for a small
amount and pay off my debts.)

Lessons for future entrepreneurs in debt: You can ignore the daily credit card
robo-calls, make arrangements with your landlord and the electric company, but
they'll come for your car faster than you think. (They grabbed mine the day
after Christmas).

~~~
pnutjam
3 months isn't that fast. Electricity won't go more then 2 usually and
landlords often won't go past the last week of the month, unless your renting
from a non-corporate landlord.

I have a stretch in the past where my landlord filed on me 4 months out of the
year and I pulled together the funds to pay rent + court costs + filing &
lawyer fees before the end of the month...

Also had Electricity turned off and that requires paying bill in full +
deposit, so usually close to double your bill, or 1.5 times if you owe 2
months. They sure take their time turning it back on too. (edited to fix
formatting)

------
MertsA
What a sad state of affairs. Predatory contracts are one thing, but why on
earth do we as a society more or less ignore white collar crime? The article
just glosses over the fact that in the Duncan's case, the agreement sent to
the court was a forgery. And I can't even blame the author for not making more
of a big deal about that because most people don't see that as seriously as
they ought to.

If you go into a bank, completely unarmed and pass a note to a teller
demanding money, you'll be locked away for years for stealing what in most
cases is only a few thousand dollars. Whoever forged that document stole
~$60,000 and no one seems interested in doing anything more than issue a
sternly worded "don't do that again".

What is it going to take to get society to get its act together and actually
start enforcing the law when it comes to white collar crime? If the details of
this article are correct, there are several employees of Yellowstone capital
that should be thrown in a jail cell for a substantial amount of time.

------
zaroth
Holy shit, this is totally insane.

The worst part is, is that there is a viable market for short term business
loans that don’t involve APYs over 300% or loan snarking, or counterfeiting
legal documents, or plundering unrelated accounts, or exploiting every legal
loophole known to man and lining the pockets of NY “marshals” while you’re at
it.

The level of corruption is mind boggling. I’ve often wanted to learn more
about the industry and was very interested in the rise of P2P lending, but
when you have to compete with scum like this, obviously that makes it near
impossible.

~~~
jbob2000
The thing is... if you forbid unethical lending, then organized crime fills in
the gap. And when you can't pay the mob, they don't take you to court, they
take your knee caps.

Just like making drugs illegal doesn't make them go away, making unethical
lending illegal doesn't make it go away either. To me, this is "harm
reduction" of financial services. Yes, it's bad, but not as bad as leaving it
on the black market.

~~~
JasonFruit
But if it's being done by the mob, the police and the courts are on your side;
in this case, the courts are against you, and the police can only shrug and
say, "Tough luck.". I'd rather have inarguably predatory lending be on the
wrong side of the law, even if it can't be eliminated.

------
notacoward
Welcome to the inevitable result of financial deregulation. The people who run
Yellowstone should never have been allowed near other people's money ever
again. There should not be a loophole treating something that's obviously
alone as though it weren't. Such high interest rates should be illegal (and
are for things legally recognized as loans). Clerks should not be allowed to
rubber-stamp an unverified creditor's statement as legal fact, without giving
the other party any notification let alone a chance to challenge those so-
called facts. Other states, and banks in other states, should not accept such
blatantly corrupt behavior.

A whole lot of people - not just the principals but also the legislators,
judges, clerks, and bankers who enable them - should spend the rest of their
lives in jail for this.

~~~
ben509
> Welcome to the inevitable result of financial deregulation.

Courts in NY are executing these blatantly unfair contracts, after other
courts all over the country decided they were blatantly unfair, and you're
blaming deregulation?

------
lazerpants
Wow. As a person who pays NYC and NYS taxes, I'm disgusted by this and sort of
ashamed.

I will definitely be writing to my state reps to outlaw this practice.

Also, the fact that NYC enriches someone responsible for helping this is
shameful and inviting corruption (though it is unsurprising to me that this is
the norm here).

------
macintux
Jalopnik recently tackled a similar abuse of the courts in Detroit wrt
subprime auto loans:

[https://jalopnik.com/how-a-subprime-auto-lender-consumed-
det...](https://jalopnik.com/how-a-subprime-auto-lender-consumed-detroit-with-
debt-a-1829527899)

------
DoreenMichele
_Confessions aren’t enforceable in Florida, where the Duncans signed theirs.
But New York’s courts are especially friendly to confessions and will accept
them from anywhere, so lenders require customers to sign documents allowing
them to file there._

Well, that's diabolical. Wow.

 _Duncan was running a struggling Florida real estate agency with her husband,
Doug. She began each day in prayer, a vanilla latte in her hand and her
Maltese Shih Tzu, Coco, on her lap, asking God for business to pick up._

This was the first line that made me feel they are just not very good business
people. Praying to god for business to pick up instead of starting the day
searching for ways to improve the business sounds like the exact sort of thing
that "No one plans to fail, they just fail to plan" quote is aimed at. She's
just kind of hoping things get better.

 _The couple had owned their agency, a Re /Max franchise, for three years and
now had 50 employees, but they still weren’t turning a profit._

See, I don't get this. How do you have _50 employees_ and no profit? I don't
understand that.

We clearly need better support for small businesses in the US. Small
businesses are frequently being run by people who simply cannot compete with
corporations and otherwise successfully "swim with the sharks."

We also need better support for micoenterprise -- for businesses with fewer
than the ten employees that you need to qualify as a _small business_. The
lack of good support for that sector is part of what is wrong with this
country. We haven't created such support and I feel it is destabilizing the
country.

Everything is "go big or go home" and that simply isn't healthy. It's fine to
have some folks shooting for the stars, but that shouldn't be the only viable
option.

~~~
ChuckMcM
> See, I don't get this. How do you have 50 employees and no profit? I don't
> understand that.

Ask Uber? :-) But Silicon Valley jokes aside, you can have a small business
where the amount of money coming in pretty much exactly matches the money
going out, and that is essentially no profit. For a real estate business, most
of those employees would be brokers who would make no salary but would make a
piece on the commission of each sale. So the percentage of the commissions
that the agency kept covered rent, and admin staff, and maybe a salary for the
principals.

~~~
DoreenMichele
Well, you will have to excuse me, but I'm some ninny who gave up a National
Merit Scholarship to a big university elsewhere and went to the local college
for a couple of years, then dropped out, in part because I knew two people
with tons of student loans and no serious career who were mooching off of
family (the mother in one case, the wife in another). So I didn't drink the
koolaid and buy the idea that a sheepskin was a slam dunk path to having a
real career and life on easy street. Thus, I wasn't willing to run up student
loans to get a degree. I felt I could deliver newspapers (because that's what
these two guys were doing) without a student loan and my life would be better
without the debt if that was what I would be doing anyway.

I also found ways to make money on the internet while homeless and that helped
get me off the street. It was critical that it actually turn a profit for me.
Low pay was acceptable. High through-puts of money -- some going out and some
coming in -- without a real profit absolutely was not acceptable.

So while I'm well aware of Twitter and Uber and all that, I cannot fathom
running a small business that doesn't turn a profit. I just don't get that. To
my mind, that makes no sense. Why on earth would I do that?

To my mind, you find something that is actually profitable and then grow it.
It seems to me there has to be something wrong with a person's thinking that
they take on 50 employees and still don't make money.

I just cannot wrap my brain around such a choice. I look at what I read and I
think the people running the business, who were _praying to God_ for business
to improve -- presumably instead of actively researching how to make things
work better (I realize you can do both and that assumption could be in error,
but I can only go by the info included in the article) -- must have been doing
something wrong in some important way.

------
korethr
My initial reaction to this is one of outrage: "How the hell is this even
legal?!" Though the article makes it clear that David Glass has found
loopholes in the legal system, and that therefore it is technically legal, it
strikes me as utterly contrary to the spirit of the financial regulations he's
managed to dodge. I would shed about as many tears for him and similar
predators being smote by the courts as I shed for Prenda Law.

There's plenty of "WTF?" to go around in this article, the usurious interest
rates, the confession of judgement, and that people are falling for this.

I am sadly not surprised that the banks are offering up their customers funds
if said bank has an office in NY, even if not based there. I imagine the
banks' legal departments are risk averse and consider that they'd have more to
potentially lose fighting such bogus claims than just offering up their
customers' money, whether said claims are legitimate or not.

IMO, the New York practice of the marshals is some abuse-ripe legal cruft that
needs to go.

I do find myself wondering if remedy for this couldn't come from a federal
angle. The US Constitution says that once affairs cross state lines, they
become a federal issue, plus there's Wickard vs Filburn that's been used to
make anything a federal issue if the fed wants it to be. I wonder if claims of
violation of due process or the usurious interest rates could be used to smite
Glass and other predators in this financial space.

------
olivermarks
This is fraud facilitated by NYS.
[https://en.wikipedia.org/wiki/Fraud](https://en.wikipedia.org/wiki/Fraud)
Needs a major class action lawsuit and some rocks overturned to find the scum
working for the state who are getting rich off this with their mob associates.

------
felixledem
Unfortunately, most consumer protections for financing don't apply to
businesses. Many of us here on Hacker News have benefited from seed or VC
investments without having to put our house on the line, but for the majority
of american entrepreneurs access to capital remains the number one issue.

I'm currently working on a startup to solve the access to capital problem for
local small businesses (mainvest.com). Open to any feedback or suggestions on
how we can tackle this issue. We're currently based in MA, but we're planning
on bringing our product to NYS soon. Hopefully they've fixed "confession of
judgement" before then.

------
Fjolsvith
Boy they sure tried to reel my business in. However, having done some time in
the past, I knew a mafia-like scheme when I saw it.

They basically wanted full control of my bank account and my credit card
processor, and wanted the loan repaid at $100 a day and at a 50% cost.

The guy calling me got really pissed when I told him I could increase my
product prices by 3% and raise the loan amount they offered over the same
period as the loan, interest free.

------
jermaustin1
This is a terrible situation. Predatory lenders dealing with owners who are in
no position to take on a loan.

I run my company with Quickbooks Online, and they have a "feature" called
QuickBooks Capital, where you can secure short term loans at not terrible
interest rates (~10%), and they report your payment history to your DUNS
number, building your company's credit history.

I take out $20k every 6 months and pay it back weekly over their 6 month
payment window and end up paying something small like 4-5% interest on it.

------
chiefalchemist
The word disruption is so often misused, abused and overused. That said, if
ever there was an industry in need of a swift kick in the stones it's the
predatory lenders in this market, as mentioned in the article.

Yes, they are meeting a need, I can't fault them for that. But their heavy-
handedness and general over-focus on the their bottom line begs to be taken to
the mat and punched in the face.

Certainly there's got to be someone reading this who can make that happen. TIA

~~~
cm2012
There's actually been a _ton_ of disruption of this space in the past 5 years.
OnDeck, Kabbage, LendingClub, Square, are all great, established tech-lending
companies. But the remaining victims are the bottom 20% of the borrower
population - it's basically not possible to profitably fund these people
unless you're straight up scamming them. So the solution has to come from
regulation, not the market.

------
thr0284way
This “merchant advance” business, in a (hopefully) less predatory form, is
driving revenue at Square and Stripe. I would like to see some comment from
someone like Patrick on how they are going to help reform this mess. They’ve
got the resources to do it, and if they don’t they will get lumped in as part
of the problem when regulation finally arrives.

~~~
mtw
I don't get this. What is the merchant advance product that Square and Strip
have to compete against this?

~~~
cowsandmilk
Not sure how they actually classify it, but Square does have Square Capital,
which is a product that gives loans to small businesses. It is different than
many loans most are used to in that it uses a "Factor Rate" rather than an
APR. You pay back the same amount, regardless of how long it takes you to pay.
Daily payment is a percentage of what you process through square in a day and
are automatically taken out, so you won't miss a payment.

Due to the oddity in how you pay, and the use of factor rates, it requires
knowing your business really well to understand what the APR will be. And the
better your business does, the higher the APR as you will pay the interest
sooner. In contrast, a traditional business line of credit, you will typically
have an upfront APR and doing better means you pay it off sooner and pay less
interest.

edit: and to be clear, I'm confident that Square doesn't do the scammy
practices in the article.

------
DoctorOetker
>New York judges took the view that debtors waived their rights when they
signed the papers.

where is the boundary of validity between "sign here to waive your right to
defend yourself" and "sign here to waive the right to keep your head (i.e.
decapitation)" legally defined?

is it possible to sign and allow a person to decapitate me? if not why not?
and why is the right to defend yourself not similarily protected?

it seems at some point both bankers and judges expect civilians to subjugate
themselves unconditionally...

------
DoctorOetker
> ...and federal regulators banned them for consumer loans in 1985. But New
> York still allows them for business loans.

perhaps they can soon apply it to consumer loans as well, claiming the
consumer failed to register as a business towards the government?

it's like Alice in Wonderland where she or someone else is accused of writing
a letter, but after pointing out it's not even the accused's handwriting, this
is viewed as cementing the malicious intent when the accused supposedly wrote
the letter...

------
christophilus
The article contains some personal info[0] on a few of the sociopaths who are
running this thing. Seems to me that if the government won't step in to do
something, hackers certainly could...

[0]
[https://www.instagram.com/juan_zillaa/](https://www.instagram.com/juan_zillaa/)

~~~
dba7dba
Welp, I clicked on the link. Did not log into instagram. And saw following:

==========

1,976 posts 22k followers 1,117 following

juan_ZILLAA

Something like a " Wall Street wolf "

2014 Alpha 12x GTR

2015 Range Rover sport

2016 Lamborghini Huracan

2018 Ferrari 488 spider

==========

Looks like he's made a few millions and fancying himself as a Wall Street
player.

~~~
0xfeba
Link is dead, merely an hour later.

~~~
dba7dba
Haha. I guess that person was alerted. I should've taken screenshot. But
really, the profile page included those cars.

------
JumpCrisscross
> _One had even grabbed his father’s retirement money_

How? Aren’t retirement accounts protected by ERISA?

------
vonnik
This is absolutely terrifying.

Fwiw, Zach Mider won a Pulitzer in 2015 for his explanatory reporting on US
corporate tax evasion.

[https://en.wikipedia.org/wiki/Zachary_Mider](https://en.wikipedia.org/wiki/Zachary_Mider)

------
paulsutter
I’m betting on either RICO, class action, or both against these guys. If
they’re so inept to be forging documents their process is surely riddled with
worse mistakes. Bravo to Bloomberg for some real journalism.

------
devoply
Class action lawsuit needed.

------
deftnerd
Confessions of Guilt are an interesting concept and maybe they shouldn't be
thrown out by NYS entirely, but signing one when there isn't guilt (especially
in advance of the loan) is a horrible practice.

Perhaps Confessions of Guilt should have an expiration date like that it must
be filed within 7 days of being signed or it's invalid.

------
tuesday20
Whats up with the comments blaming the victims here? Duncans’ only fault was
being naive. But how many of us commenting here know about “confession of
judgement”?

This shouldn’t have happened in the first place, regardless of how naive the
borrowers were.

------
dcchambers
This is absolutely insane.

------
aceon48
This article made me so mad.

------
peatfreak
Why and how are Bloomberg articles constantly getting to the top of Hacker
News? Was there every any resolution to their murky article about their claim
that Supermicro mainboards were apparently getting compromised on the
production line?

~~~
wgerard
Likely answer: People like reading Matt Levine's column and he usually links
to Bloomberg articles (as you might expect).

The two Bloomberg links I see on the front page were directly referenced in
his column today.

------
meesterdude
> The spam fax felt like a gift from God.

Did you ever think you would read such a sentence - and that it would be real?

> The advance turned out to be for $36,762, repaid in $800 daily debits from
> their bank account starting the day after they got the money. This would
> continue for about three months, until they’d repaid $59,960, amounting to
> an annualized interest rate of more than 350 percent. A small price to pay,
> Doug figured—soon he’d have all the money he needed in cheaper, longer-term
> debt.

totally speechless. $800 in DAILY payments, at 350% interest, for a TRYOUT
loan that he didn't even need, in order to get a bigger loan of $800K. FROM A
SPAM FAX. And to top it off - they didn't talk to their lawyer, or (i assume)
accountant.

> Jerry Bush, who ran a plumbing business with his father in Roanoke, Va.,
> signed confessions for at least six cash advances from companies including
> Yellowstone, taking one loan after another as his payments mounted to
> $18,000 a day.

A day! how could any small business handle that?

This is just heartbreaking. While these were horrible (or desperate) financial
decisions - it's not their fault for being victims. This is what laws and
regulations are for. We can and will eventually stop this from happening. I
think this being a series of stories will help give it the spotlight it needs.

~~~
Mithorium
>Bush’s contracts with Yellowstone show that the company advanced him a total
of about $250,000 and that he paid them back more than $600,000.

how do people get tricked into agreeing to terms like this

~~~
sleepybrett
They aren't tricked, they are desperate.

