The twin engines of our economy are America’s 32 million small businesses and the more than 60 million people they employ. So when small businesses become the target of misleading claims, deceptive tactics, and outright bullying, the FTC takes notice. This is the gist of the agency’s 2020 lawsuit against cash advance company RCG Advances, LLC and owner Robert Giardina. A just-announced settlement will net consumers more than $2.7 million and includes a key provision to protect small businesses going forward.
According to the FTC, when small business owners sought capital, RCG — formerly known as Richmond Capital Group — lured them in with quick talk and supposedly soft terms for what are called cash advances. merchant funds. Merchant cash advance companies provide funds to businesses in exchange for a percentage of their earnings, often in the form of daily withdrawals from the business’s bank account until the obligation is met. This is an alternative form of financing unfamiliar to many small business owners.
The FTC alleged that RCG, Giardina and others assembled a cover-up of misrepresentations that obscured the true nature of the transaction. According to the lawsuit, the defendants told business owners that “no personal guarantee guarantee” was required – and then wrote personal guarantee requirements into their contracts. They advertised “no upfront fees” – then pocketed a large sum of money, leaving the companies with far less funding than they were promised. The FTC says defendants also forced people to sign judgment admissions, which allowed defendants to go straight to court for an uncontested judgment in the event of an alleged breach, leading to the illegal seizure of business assets and personal.
These allegations are troubling enough, but RCG was just starting to heat up. According to the FTC, the company threatened people with physical violence, telling one person it would “break his jaw” if he didn’t pay. Another person was told that if she didn’t take it out on her, she would falsely accuse her of being a child molester.
The FTC 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 forbidden wagon, prohibiting them from engaging in small business financing and debt collection. . For how long? Still.
At a time when many small businesses are struggling to stay afloat, the FTC is paying close attention to the tactics of companies that claim to throw them a financial lifeline. Spotted some dubious financing offers that target small businesses? Report it to the FTC.