>>> PREDATORY LENDING POPS UP AT
>>> PREDATORY LENDING POPS UP AT
THE MOST INOPPORTUNE MOMENTS.
IT’S SICKENING, AS MORE SMALL
BUSINESSES ARE STRUGGLING TO
SURVIVE, REGULATORS ARE CRACKING
DOWN ON A MAJOR GROUP OF LENDERS
TARGETING THE MOST VULNERABLE
BUSINESSES AND THEY’RE DOING IT
WITH HIGH-COST LOANS AND ABUSIVE
COLLECTION TACTICS.
THEY ARE CALLED MERCHANT CASH
ADVANCE COMPANIES AND THEY
PROVIDE NEARLY $20 BILLION IN
FUNDING LAST YEAR ALONE.
ONE OF THE LENDING COMPANIES IS
TAKING ACTION AGAINST NEARLY A
THOUSAND BUSINESSES ACROSS THE
COUNTRY WHO CAN NO LONG EARER AF
TO PAY.
NBC’S KATHY PARK HAS MORE.
>> Reporter: FOR NEARLY 30
YEARS, JAY HOHEN HAS FOUND JOY
IN PERSONAL TRAINING AND TURNED
THAT PASSION INTO RUNNING A
PRIVATE STUDIO WITH HIS WIFE IN
LA JOLLA, CALIFORNIA.
>> IT’S A GREAT OPPORTUNITY FOR
US TO DO SOMETHING WE LOVE.
>> Reporter: A RECENT INJURY SET
HIS BUSINESS BACK SO HE TOOK OUT
A LOAN.
A MONTH LATER, COVID-19 HIT.
HE WAS FORCED TO CLOSE HIS
STUDIO AND UNABLE TO PAY HIS
LENDER, PAR FUNDING.
>> I TOLD THE PEOPLE AT PAR, DUE
TO THE CURRENT CIRCUMSTANCES,
THAT I DEFINITELY DIDN’T SEE
COMING, I’D LIKE TO FREEZE MY
ACCOUNT.
>> Reporter: IN RETURN, HOHEN
SAYS PAR BEGAN TURNING THE
SCREWS.
>> WHAT WAS PROBABLY THE MOST
EGREGIOUS THREAT THEY THREW AT
YOU?
>> THIS CONFESSION OF JUDGMENT.
THREATENING THAT THEY WOULD
REACH OUT TO BUSINESS ASSOCIATES
THAT I’VE HAD.
>> Reporter: UNDER THE DEAL THEY
SIGNED, PAR HAS ACCESS TO
HOHEN’S CHECKING ACCOUNT.
LAST MONTH, THE COMPANY FILED A
CONFESSION OF JUDGMENT IN COURT
THAT GIVES THEM THE RIGHT TO
FREEZE HIS ACCOUNTS IF HE
DOESN’T PAY.
>> THEY’RE BORDERLINE CRIMINAL
HARASSMENT.
>> Reporter: KNOWN AS A MERCHANT
CASH ADVANCE COMPANY, PAR
FUNDING IS PREYING ON SMALL
BUSINESSES, CHARGING SKY-HIGH
INTEREST RATES UP TO 400% ON
LOANS TO SMALL COMPANIES LIKE
HOHEN’S.
>> THEY’RE STRONG HRP AMMING
PEOPLE LIKE MYSELF.
>> Reporter: SINCE 2008, MAJOR
BANKS CUT LENDING TO SMALL
BUSINESSES AND MERCHANT CASH
ADVANCE LENDERS HELPED FILL THAT
VOID.
BECAUSE THEY’RE NOT BANKS,
MERCHANT CASH ADVANCE COMPANIES
ARE SUBJECT TO LIGHTER
REGULATIONS.
NOW, REGULATORS AND LAW
ENFORCEMENT ARE STARTING TO TAKE
ACTION.
LATE LAST MONTH, THE FBI RAIDED
TWO OF PAR FUNDING’S OFFICES IN
PENNSYLVANIA AND THE SECURITIES
AND EXCHANGE COMMISSION FILED
SUIT ALLEGING THE COMPANIES AT
THE CENTER OF A $500 MILLION
INVESTMENT SCHEME, MISLEADING
INVESTORS ABOUT DEFAULT RATES ON
LONS AND HIDING THE CRIMINAL
PAST OF AN OWNER CONVICTED OF
FRAUD AND RUNNING AN ILLEGAL
GAMBLING OPERATION.
LAWYERS FOR THE COMPANY AND ITS
OWNERS VIGOROUSLY DISPUTE THE
SEC’S ALLEGATIONS BUT DECLINED
TO COMMENT FURTHER TO NBC NEWS.
RECENTLY REGULATORS FILED
LAWSUITS AGAINST TWO OTHER
MERCHANT CASH ADVANCE COMPANIES,
RCG, WHICH DECLINED TO KAMTCOMME
AND YELLOWSTONE CAPITAL, WHICH
DIDN’T RESPOND.
>> THIS IS A BROKEN MARKET.
>> Reporter: ROHIH CHOPRA, A
COMMISSIONER AT THE FEDERAL
LAWSUITS SAYS COMPREHENSIVE
INDUSTRY REFORM IS IMPERATIVE.
>> WE’RE SEEING A BUSINESS MODEL
WHERE LENDERS CAN MAKE BIG
PROFITS EVEN WHEN THE BORROWER
FAILS.
>> Reporter: FEDERAL OFFICIALS
SAY THEY’RE CONSIDERING WHETHER
THESE LOANS SHOULD BE SUBJECT TO
CAPS ON INTEREST RATES IN THE
SAME WAY LOANS FROM BANKS ARE
CONSTRAINED.
AS REGULATORS PLAY CATCH-UP, JAY
HOHEN SAYS HE’LL MAKE IT
THROUGH, BUT WARNS OTHERS --
>> YOU CAN MAKE MISTAKES IF YOU