Across the US, thousands of contractors and other small-business owners have been getting hit by a legal process where financiers lend money at super high interest rates, then go through a loophole in the New York court system to seize your entire business, bank accounts, and bankrupt your business. If this sounds like a sophisticated Nigerian 419 scam, read on..
So who are these lenders? one of the more notorious, Yellowstone Capital LLC (also has many other business names so that people don't catch on), have been putting businesses under water with absurdly high interest rates (as much as 400% annually). They seize their clients' bank accounts even without a court hearing and even though repayments are being made. This is all legal, thanks to a legal document called a "confession of judgment".
The "please-fuck-me-over" document used by lenders
A "confession of judgement" is a document that waives the borrowers' rights to defend themselves when lenders take them to court. With this instrument, the judgement is a forgone conclusion. And since these lenders are particularly predatory, they can (and they do) accuse clients of defaulting (without proof), fabricate stories, change provisions in the agreement, all in order to enforce that “confession of judgement” and seize assets (and get their payday). While businesses and lives are ruined, these lending companies are raking in the money, and growing. Last year alone, Yellowstone “advanced” (they don't use the word loan to side-step usury laws) $553 million to lenders, at the back of a $120 million line of credit from Wall Street banks in 2016.
To date, there's been more than 1,500 cases by Yellowstone alone, this cash-advance industry has escaped the scrutiny of state and federal regulators. Partly because everybody gets a cut; the bank gets their processing fee, the county clerk's office gets theirs, as well as the state court system and the city hall. Even though federal regulators banned confessions for consumer loans in 1985, New York still allows them for business loans.Read more...