Merchant cash advance operators settle FTC charges for bilking small businesses

The dual dynamos that power our economy are America’s 32 million small businesses and the more than 60 million people they employ. So when small businesses become targets for misleading claims, deceptive tactics, and flat-out intimidation, the FTC takes notice. That’s the gist of the agency’s 2020 lawsuit against merchant cash advance outfit RCG Advances, LLC and owner Robert Giardina. A just-announced settlement will return more than $2.7 million to consumers and includes a key provision to protect small businesses in the future.

According to the FTC, when small business owners sought capital, RCG – formerly known as Richmond Capital Group – lured them in with fast talk and supposedly sweet terms for what are called merchant cash advances. Merchant cash advance companies provide funds to businesses in exchange for a percentage of their revenues, often in the form of daily withdrawals from the business’s bank account until the obligation has been met. It’s an alternative form of financing unfamiliar to many small business owners.

The FTC alleged that RCG, Giardina, and others stitched together a blanket of misrepresentations that cloaked the true nature of the transaction. According to the complaint, the defendants told business owners that “no personal guaranty of collateral” was required – and then put personal collateral requirements in their contracts. They advertised “no upfront fees” – and then pocketed a hefty chunk of cash off the top, leaving businesses with substantially less funding than they had been promised. The FTC says the defendants also forced people to sign confessions of judgment, which allowed the defendants to go straight to court for an uncontested judgment in case of an alleged default, leading to the unlawful seizure of business and personal assets.

Those allegations are troubling enough, but RCG was just getting warmed up. According to the FTC, the company threatened people with physical violence, telling one person they would “break his jaw” if he didn’t pay. Another person was told if he didn’t pony up, they would falsely accuse him of being a child molester.

The FTC had previously settled with defendants RAM Capital Funding, LLC and Tzvi Reich. The case against Jonathan Braun is pending.

In addition to the $2.7 million financial judgment with RCG and Giardina, the just-announced order puts them on the Banned Wagon, prohibiting them from engaging in small business financing and debt collection. For how long? Forever.

At a time when many small businesses are struggling to stay afloat, the FTC is paying close attention to the tactics of companies claiming to throw them a financial lifeline. Have you spotted questionable financing offers that target small businesses? Report it to the FTC.