Sign Here to Lose Everything

Zachary R. Mider, Zeke Faux, Demetrios Pogkas and David Ingold

Bloomberg News reporters investigated the merchant cash-advance industry, a little-known and unregulated corner of the lending market that has thrived in the aftermath of the financial crisis, and found it rife with abuse. Cash-advance companies loan money to small businesses at interest rates often higher than those that mafia loan sharks demand, the reporters discovered. What’s worse, the borrowers must sign an arcane legal document called a “confession of judgment” giving up their right to defend themselves if the lender takes them to court and accuses them of not paying, even without any proof. In this exhaustive series, Bloomberg’s team showed how lenders have abused the system to seize the assets of borrowers, abetted by a rubber-stamping court system in New York that routinely accepted, processed, altered and falsified documents supplied by the lenders. The series uncovered that one government officer, a New York City marshal, cleared $1.7 million after expenses by helping lenders collect financial judgments against borrowers who had no legal recourse to recover their lost assets. “It’s like an arbitration agreement,” the reporters concluded about the industry, “except the borrower always loses.” The series led to an investigation by the New York attorney general’s office and calls for reform in the state and federal legislatures.

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