This ‘Fast Cash’ Loan Could Have Hidden Costs – NBC 7 San Diego
Just like your family budget, cash flow can be a problem for small businesses.
And there is no shortage of lenders to offer quick and temporary financial assistance.
Rick Hagen signed up with one of them to help him manage the cash flow for his local auto sales business.
But Hagen told NBC 7 the deal quickly turned into a financial nightmare, ultimately leading him to bankruptcy.
“You are just a victim,” Hagen said. “You’re the next person they’re going to send it to.” “
Hagen loves cars. His passion for unique and premium vehicles has helped him shape his career as a personal shopper for car enthusiasts looking for that special ride.
Hagen told NBC 7 that he regularly uses short-term loans to cover his financial transactions. That’s what led him to a New York-based lender who Hagen said offered to quickly fund a small business loan at 16% interest.
“Here’s their thing,” Hagen recalled of the pitch he got from Last Chance Funding / LCF. “We are transparent and we want to help you grow your business. “
But Hagen said he didn’t realize that if he fell behind on his payments, that interest rate would skyrocket.
“So if you really dig, you don’t pay 16%,” he said. “You don’t pay 25%. You pay 100 or even 180%. And it could be more.
In fact, at one point, Hagen and his attorney allege that LCF and its affiliated lenders were charging Hagen 360% interest on his balance owed.
Hagen’s attorney, Michael Alfred, told NBC 7 that these astronomical interest rates were legal because Hagen had not technically signed up for a loan, but instead took out a “merchant cash advance,” which, according to Alfred, allowed the New York lender to avoid interest rate limits. and anti-wear laws.
Worse yet, Hagen had signed a “confession of judgment,” in which he essentially waived his right to a hearing if he did not honor his repayment agreement.
Alfred said Hagen is not the only small business owner who has found himself financially distraught after signing similar contracts.
“It’s not just Rick,” Alfred said. “Thousands of businesses in many different industries (get these loans). “
Hagen says the New York lender has rejected his repeated demands for a reasonable payment schedule and immediately said to him that a company representative said, “I’m going to put you through hell, Rick. You will never forget me. I’m going to bankrupt you.
Hagen said the New York lender tried to empty his bank accounts when he fell behind on his payments. After securing a judgment against him, Hagen said the company posted a guard at his front door to intercept any cash payments from customers.
Hagen sued Last Chance Funding, Inc and other defendants in federal court here last August. His trial accused the company of racketeering and other civil wrongdoing. But Hagen’s trial was unsuccessful and his lawsuit was dismissed last November.
A Last Chance Funding / LCL spokesperson told NBC 7 that another “ongoing litigation regarding this matter prohibits us from discussing the details of Hagen’s allegations.” But the spokesperson noted that Last Chance Financial has so far prevailed in court against Hagen. “The same district court lawsuit (which Hagan filed unsuccessfully last year) attempted to challenge the rulings of two separate courts, both of which had ruled in favor of LCF,” the spokesperson said.
After losing his case in federal court, Hagen filed for bankruptcy. But Last Chance Financial is now contesting its ability to pay off its debt to the company.
In a lawsuit filed in the bankruptcy case, Last Chance Financial argues that Hagan did not disclose the existence of other outstanding debts and judgments when he signed his “merchant contract” with LCF. This omission, the company argues, allowed Hagan “to obtain money (from CFL) under false pretenses, misrepresentation or actual fraud.”
As a result, Hagan is still responsible for the debt, the company argues.
When he filed for bankruptcy, Hagen also closed the doors of Euromotorwerks. He always hopes for a second chance in the job he loves. Meanwhile, he has a new passion for protecting consumers and small business owners from the potential nightmare of merchant cash advances and judgmental admissions.
“I just need everyone to know that if they can do it to me, they will do it to them,” he said. “And they will.”
Last Chance Financial / LCF takes a very different view of its services. “A merchant cash advance is a valuable tool for businesses, and LCF has helped thousands of businesses across the United States grow and maintain their operations,” the company spokesperson told NBC 7 .