RAM Capital Funding and Owner Tzvi Reich Banned from Merchant Cash Advance Industry

Settlement with FTC Includes Fine, Ban from Industry

Andy Spears

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The Federal Trade Commission (FTC) announced a settlement today that bans a merchant cash advance company and its owner from the industry as a result of deceptive and illegal practices.

As a result of the settlement, RAM Capital Funding, LLC and its owner Tzvi Reich, will be permanently banned from the merchant cash advance and debt collection industries, and required to pay $675,000 to settle charges that they used deceptive and illegal means to seize assets from small businesses, non-profits, and religious organizations.

“Today’s order makes clear that preying on small businesses will come with a heavy price,” said Samuel Levine, the Director of the FTC’s Bureau of Consumer Protection. “These defendants have been banned from the merchant cash advance business, and we intend to hold their co-defendants similarly accountable.”

Merchant cash advances are a type of alternative small business financing. Generally speaking, merchant cash advance companies provide funds to businesses in exchange for a percentage of the businesses’ revenue. Typically, a merchant cash advance company will make daily withdrawals from the business’s bank account until the obligation has been met.

Threats of Violence

The FTC alleged that the defendants made unauthorized withdrawals from consumers’ accounts and used unfair collection practices, including sometimes threatening physical violence. In addition, the FTC alleged that the defendants illegally weaponized “confessions of judgment,” contractual terms that allowed defendants to pursue customers’ personal assets in court and obtain uncontested judgments against them.

Merchant Cash Advances Carry Consumer Risks

A previous FTC report noted several areas of concern relative to Merchant Cash Advances (MCAs).

Panelists at our Forum and other experts have expressed a variety of concerns about MCAs. First, they note that MCAs have very high costs — including, in some cases, estimated APRs in the triple digits. As a result, many business owners who obtain MCAs may struggle to successfully repay them. One panelist noted that businesses desperate for funding often seek out MCAs in the short term because…

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Andy Spears

Writer and policy advocate living in Nashville, TN —Public Policy Ph.D. — writes on education policy, consumer affairs, and more . . .