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 offering quick and temporary financial assistance.

Rick Hagen signed up with one to help manage cash flow for his local auto sales business.

But Hagen told NBC 7 the deal quickly turned into a financial nightmare, which ultimately led him into bankruptcy.

“You are just a victim,” Hagen said. “You’re the next person in line they’re going to do it to.”

Hagen loves cars. His passion for unique and premium vehicles helped shape his career as a personal shopper for car enthusiasts looking for a special vehicle.

Hagen told NBC 7 that he regularly uses short-term loans to bridge his financial transactions. That’s what led him to a New York-based lender who, according to Hagen, 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’re not paying 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 outstanding balance.

Hagen’s attorney, Michael Alfred, told NBC 7 that those astronomical interest rates were legal because Hagen technically didn’t sign a loan, but instead took a “merchant’s cash advance,” which , according to Alfred, allowed the New York lender to avoid interest rate limits. and anti-wear laws.

Worse still, Hagen had signed a “confession of judgment,” in which he essentially waived his right to a hearing if he failed to comply with his repayment agreement.

Alfred said Hagen wasn’t the only small business owner to find himself financially crippled after signing similar deals.

“It’s not just Rick,” Alfred said. “Thousands of businesses in many different industries (get these loans).”

Hagen claims the New York lender rejected his repeated pleas for a reasonable payment schedule, and a company representative immediately told him, “I’m going to put you through hell, Rick.” You will never forget me. I will bankrupt you.

Hagen said the New York lender tried to empty his bank accounts when he fell behind in payments. After obtaining 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 lawsuit accused the company of racketeering and other civil wrongdoing. But Hagen’s lawsuit failed and his lawsuit was dismissed last November.

A Last Chance Funding/LCL spokesperson told NBC 7 that other “ongoing litigation relating to this matter precludes us from discussing the specifics 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 unsuccessfully filed last year) attempted to challenge the decisions of two separate courts, both of which 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 challenging its ability to meet its debt to the company.

In a lawsuit filed in that bankruptcy case, Last Chance Financial argues that Hagan failed to disclose the existence of other outstanding debts and judgments when he signed his “merchant agreement” with LCF. This omission, according to the company, allowed Hagan “to obtain money (from LCF) through false pretences, misrepresentation, or actual fraud.”

Therefore, Hagan is still liable for the debt, the company claims.

When he filed for bankruptcy, Hagen also closed the doors of Euromotorwerks. He still hopes for a second chance in the profession he loves. During this time, he has a new passion for protecting consumers and small business owners from the potential nightmare of merchant cash advances and admissions of judgments.

“I just need everyone to know that if they can do it to me, they’re going to do it to them,” he said. “And they will.”

Last Chance Financial/LCF has 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’s spokesperson told NBC. 7.

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