How to Avoid Being Sued by a Professional TCPA Plaintiff
July 13, 2018
Did you know that if you receive an unwanted solicitation call on your private cell phone or residential landline, you can win between $500 and $1,500 in damages from the offending company? The company can be charged for violating a statute of the 1991 Telephone Consumer Protection Act (TCPA), which prohibits companies from calling consumers without their express permission. You might not know about this, but others know about it all too well.
Some people use this TCPA statute as a way of making money, by purchasing multiple phone numbers in the hope they will receive unsolicited phone calls that violate the TCPA statute. And if they do, they sue. AltFinanceDaily previously explored “professional plaintiffs” like this, with a focus on those who have come up against funding companies.
According to Michael O’Hare, CEO of Colorado-based Blindbid, people who manipulate the TCPA statute for profit also target lead generation companies like his. O’Hare is currently being sued by a plaintiff for several million dollars in a class action lawsuit. The claim is that Blindbid allegedly made five unsolicited calls in 2016 to the plaintiff’s plumbing company. (According to David Klein, Managing Partner at Klein Moynihan and Turco, there is a murky area in the TCPA regulation where, if a cell phone is used for both personal and business use, the phone can be considered a personal phone, protected under TCPA.) In O’Hare’s case, upon further discovery, it was determined that only one of the five alleged calls actually came from Blindbid. But O’Hare says that the number was opted in and manually dialed. Regardless, O’Hare’s plaintiff is a pro, what some might call a “professional plaintiff.”
Over the last six years, this plaintiff participated in four major class action lawsuits that have led to combined settlements of $31 million, according to O’Hare. The plaintiff has also filed 34 cases in federal court since 2016, O’Hare said.
What is noteworthy about O’Hare’s case is that it’s part of what he says is a trend towards class action lawsuits based on TCPA violations, and often brought on by professional plaintiffs. O’Hare said it’s no coincidence that his plaintiff waited for two years to sue.
“The longer a plaintiff waits, the more members he can bring into the class. And the more members in the class, the larger settlement,” O’Hare said.
As a way to transform O’Hare’s lawsuit into a class action suit, he said that his plaintiff’s attorney has made the argument that if Blindbid violated his client’s TCPA rights to privacy with the one unsolicited call, then Blindbid likely violated others as well. So in discovery, the plaintiff’s attorney wants to compel Blindbid to turn over its phone records for the past two years to prove that Blindbid had “express written consent” from the other merchants it called. In the age of the internet, “express written consent” translates to filling out an online form where the individual consents to receive a phone call.
To satisfy the attorney’s request, Blindbid would have to match every phone number that was called with a corresponding computer IP address. This should be doable, but O’Hare says that professional plaintiffs, like his, deny that they ever filled out an online lead form, or that the IP address O’Hare has on record belongs to them.
“In the past, if there was an alleged TCPA violation, most companies could settle for a few thousand dollars to $10,000 depending on the number of violations,” O’Hare said. “Now there are these are multi-million dollar settlements.”
Unlike the fines of years past, these class action lawsuits can sink your company. While O’Hare said that there is no way to completely protect one’s company from being sued, below are some of his recommendations.
Have express written consent of all the merchants you call
Online consent is valid if the text explicitly states to the user that he is giving, in effect, express written consent to be contacted by your company by phone, text and/or email.
Register your company with Federal and State Do Not Call Registries.
Respect merchants’ requests
If they do not want to be called any longer, put their numbers on your “Do Not Call” list.
Have a written “Do Not Call” policy
Have a TCPA attorney review the policy and include a copy in your company employee guide.
Find a good TCPA scrubbing service
These are services that have many of the numbers that belong to professional plaintiffs and they monitor for newly registered phone numbers. They tell you which numbers to remove from your lists. Some good scrubbing services are TCPALitigatorList.com and DNC.com.
Don’t buy lists from overseas
These lists are full of professional litigator phone numbers you are taking a huge risks.
Never autodial / robo call
Robo calls are the most dangerous type of calls you can make unless you have a full opt-in list with express written consent from each of the merchants. Robo calls and text messaging TCPA violations are the easiest TCPA cases for plaintiffs to win and the settlements are higher. Every robocall or text is fined. The use of an autodialer is one of the elements to prove a TCPA violation. If you use an auto dialer with human intervention, like EVS 7, you can argue that your autodialer calls are manual calls. Still, use caution.
Consult with a TCPA attorney
I would advise every company that does any outbound calling to consult with a TCPA attorney about best practices. An ounce of prevention is worth a pound of cure.
DFS Releases Recommendations for Online Lending
July 12, 2018
The New York State Department of Financial Services (DFS) released a report on Wednesday on the subject of online lending in the state. The report was mandated by a bill signed by New York Governor Andrew Cuomo on June 1 of last year. According to the original bill, this report was to be researched and composed by a task force of multiple parties. But in the eleventh hour, the section regarding the task force was struck. The report is to be presented to the governor, the temporary president of the senate, the speaker of the assembly, the chair of the senate standing committee on banks, and the chair of the assembly standing committee on banks.
Wednesday’s 31-page report is based on survey responses from 35 online lenders operating in the state, lending both to businesses and to individuals. One of the revelations in the report is that, from the data obtained, “New York individuals appear to account for a higher total dollar amount of loans than New York businesses.”
The report presents three primary assertions:
Equal Application of Consumer Protection Laws.
The report establishes that New York has strong consumer protection laws and regulations that apply to financial institutions. “These protections should apply equally to all consumer lending and small business lending activities,” the report reads. The report explains that there are strong protections against payday lenders and indicates that there should be strong protections across the board, even though the financial products and the consumers may vary widely.
Usury Limits Must Apply to All Lending in New York.
The report asserts that access to credit at usurious rates has long been prohibited in New York and that online lenders should not be able to bypass this by having arrangements with banks in other states, like Utah, where the usury laws are different. In New York, the civil usury rate is 16% and the criminal usury rate is 25%. But because online lenders have arrangements with out-of-state banks, they can charge interest at rates well above 25%.
Currently, if an online lender sues a merchant for not paying, the merchant cannot use usury as a defense. In the report, DFS recommends that a business should have the right to present usury as a defense.
All Online Lenders Should be Licensed and Supervised.
The report states that New York State chartered banks, credit unions and licensed non-depositories are subject to regular examinations by the DFS and, if applicable, federal regulatory agencies.
“Many online lenders remain unlicensed in New York with no direct supervisory oversight from a safety and soundness or consumer compliance perspective,” the report reads. “Direct supervision and oversight is the only way to ensure that New York’s consumers and small business owners receive the same protections irrespective of the channel of delivery [of financing.]”
Some of these issues relate to the well-known 2015 Madden v. Midland Funding court decision, in which a credit card consumer (Madden) won a case against a debt-collection agency (Midland Funding) because the court decided that Midland, as a non-bank, was not allowed to charge interest above what was allowed in the state.
Breakout Capital Finance Acquires HomeZen, Inc. Technology
July 3, 2018McLean, Va. (July 3, 2018) – Breakout Capital Finance (“Breakout Capital”), a leading technology innovator and small business lending company, announced today that it has acquired HomeZen’s technology. HomeZen is a real estate technology company providing powerful software tools for home sellers using technology to more efficiently and effectively sell their homes.
HomeZen’s innovative core technology enables users to source and evaluate offers in order to achieve the best possible outcome. This technology, which includes calculators and other user tools, will be used by Breakout Capital to empower small businesses searching for working capital solutions. The company plans to unveil a new website incorporating these features later this year.
“Since its inception, Breakout Capital has prioritized being a customer-focused disruptor, seeking out ways to better serve our customers,” said Carl Fairbank, Founder and Chief Executive Officer of Breakout Capital. “HomeZen’s technology is incredibly innovative, and it will not only help us improve the way small businesses search and evaluate their options to access working capital, but will also help to empower entrepreneurs to do more with their already limited time.”
“At HomeZen we use technology to empower home sellers with the information and tools they need to easily and cheaply sell their homes,” added Kevin Bennett, Co-Founder and Chief Executive Officer of HomeZen. “I’m excited that Breakout Capital will be able to use our technology to simplify what can be a stressful, complicated process for small business owners.”
This is another milestone in the fast growth of Breakout Capital. Throughout 2018, Breakout Capital has rapidly grown loan originations, repeatedly breaking records for new funding volume. In parallel, it has continued to innovate its technology platforms, with notable advances in machine learning, artificial intelligence, and the use of blockchain to support lending operations.
Breakout Capital also recently closed on a substantial new credit facility with Medalist Partners and expanded its headquarters in McLean, Virginia.
About Breakout Capital Finance
Breakout Capital Finance is a leading financial technology company that uses best-in-class technology to provide a wide range of credit solutions to small businesses across the country. Built on the three pillars of transparency, education and advocacy for small business, the company is one of the fastest-growing direct lenders in the space and leads a world-class technology innovation effort. Breakout Capital Finance is a Principal Member of the Innovative Lending Platform Association and is an original advocate for the SmartBoxTM standard for transparency and cost disclosure.
To learn more about Breakout Capital Finance, please visit www.breakoutfinance.com.
Yellowstone Capital Funded $68M in June
July 2, 2018Yellowstone Capital originated $68 million in funding to small businesses in June, according to the company. The figure topped their previous month of $64.5M.
Kalamata Capital Merges with Kings Cash Group
June 28, 2018
Kalamata Capital announced today that it has entered into an agreement to merge with Kings Cash Group, effective July 1. The new entity will be called Kalamata Capital Group, or KCG, retaining the Kalamata Capital brand. Together, the new entity and its affiliates will provide approximately $300 million of capital annually to over 5,000 small businesses.
Michael Jaffe and Albert Gahfi have been designated the co-Presidents of Kalamata Capital Group LLC, the direct funding and operating entity, and they will run the day-to-day operations. Steven Mandis, Brandon Laks, Carlos Max, and Connor Phillips will be the Chairman, Chief Operating Officer, Chief Financial Officer, and Chief Credit Officer, respectively, of the holding company, Kalamata Holdings LLC. All are members of the Executive Committee of Kalamata Holdings LLC.
“With this partnership we become the preeminent one stop solution for merchants and strategic partners in the industry,” Gahfi said. “Strategic partners can submit one application, and we will quickly develop competitive, actionable solutions.”
Laks, Chief Operating Officer of KCG told AltFinanceDaily that employees of both companies will be retained and the former Kalamata Capital offices, both in Bethesda and New York, will remain in place. The Manhattan office of Kings Cash Group will also remain and all products that the two companies used to offer separately, will now be offered by KCG, including small business loans, SBA loans, factoring, equipment leasing and merchant cash advance, among others. Kalamata Capital offered all of these products while Kings Cash Group focused on merchant cash advance.
“With no debt, Kalamata Capital has one of the strongest balance sheets in the industry,” Jaffe, co-President of the newly formed KCG said. “Their Chairman Steven Mandis worked at Goldman Sachs, was a Senior Advisor to McKinsey, has a PhD from Columbia University and teaches at Columbia Business School. He has utilized that experience to build a distinctive partnership culture, established brand, and institutional-grade processes and procedures.”
Mandis, Chairman of KCG, said: “We know and value KCG’s technology platform and people, and we believe their talent and capabilities will further strengthen our overall merchant value proposition. The partnership will enable us to better serve more small businesses by enhancing our underwriting capabilities to provide access to affordable business financing solutions to help them and their communities grow and thrive.”
Stacking Lawsuit Results in Settlement Before Trial
June 19, 2018A lawsuit between RapidAdvance and Pearl Capital over tortious interference will not be going to trial after all, AltFinanceDaily has learned. Originally scheduled to begin on June 25th, the parties have reportedly reached a settlement.
Neither party would respond for comment.
RapidAdvance filed its lawsuit against Pearl in November 2015 with the hope that they could set a precedent against “stacking.”
The suit was filed in the Circuit Court of Maryland under Small Business Financial Solutions, LLC v. Pearl Beta Funding, LLC, Case No. 411478-V.
Collector Says “No” to Debt Settlement Companies That Want His Data
June 19, 2018
Debt settlement companies often find their leads by scouring through UCC filings, or publicly available forms that a creditor files to give notice that it may have rights to the property of a debtor. In the case of a small business, perhaps the refrigerators in a restaurant.
“[Looking through UCC filings] is a way of getting access to businesses that obviously owe somebody some money for their business,” said Shawn Smith, founder and CEO of Dedicated Commercial Recovery, a commercial collections company in Roseville, Minnesota.
But Smith told AltFinanceDaily about another approach that debt settlement companies have taken to obtain leads of struggling businesses. He said they come to him.
“Who has a ton of accounts of struggling business owners?” Smith said. “Debt collection agencies that are working on behalf of funding sources. So [we] have like a list of all lists.”
Smith said that he gets approached by debt settlement companies looking for the contact information of struggling companies.
He always says “no.”
“They’re coming to me and saying ‘Hey, you know, for any merchant you send us that’s struggling, if we start working with them to help settle their debts, we will give you a large portion of the fee we make on settling that debt,’” Smith said. “And we of course would never do that.”
Dedicated works in two areas of collections: merchant cash advance and equipment leasing. In both cases, its goal is to recoup money for its clients, either merchant cash advance companies or equipment leasing companies.
Unlike this arrangement, a debt settlement company is not hired by a funding company. Instead, according to Smith, the debt settlement company searches for a struggling company, instructs the merchant to stop paying the funder and then approaches the funder with a settlement deal for often a fraction of what the funder is entitled to under the agreed upon deal. Smith said that settlement companies almost always propose to the funder: 20 percent of the value of the deal over five years.
Smith said he does work with debt settlement companies if they approach him representing a small business that can’t pay its bills, as long as what’s offered is within the range of what the funding company client would accept. Otherwise it’s a no-go. While Smith doesn’t share the names of struggling small businesses in exchange for kickbacks in the event of repayment, he’s convinced that this happens as he continues to be approached.
Founded by Smith in 2015, Dedicated has a staff of 18.
Lending Express Opens Office in Silicon Valley
June 13, 2018
Tel Aviv-based Lending Express announced its entrance into the U.S. market yesterday. It opened an office in San Matteo, CA and has officially appointed Moshe Kazimirsky as VP of Strategic Partnerships and Business Development to support the new West Coast office.
“After the immense success we’ve had in the Australian market, we knew that our platform was ready to take on the U.S.,” said Lending Express CEO Eden Amirav.
Lending Express initially launched its business in Australia in October 2016. The company provides an online marketplace that connects merchants to alternative funders. After only a year and a half, Amirav told AltFinanceDaily that Lending Express is now the largest business of its kind in Australia – even though they only set foot on the continent a month ago.
Meanwhile, Lending Express has also been operating in the U.S. for months and has already partnered with leading online lenders like OnDeck, Kabbage and Fundbox, according to Amirav. Given the company’s experience in both the Australian and American markets, AltFinanceDaily asked Amirav what he thought the differences were.
“In general, they are much more similar than people think,” Amirav said. “But in the U.S., people like to look around more.”
Generally, if an Australian merchant is approved, they will move forward with the deal right away, Amirav said. Lending Express offers a myriad of products on its platform, including equipment financing, invoice funding, business line of credit and merchant cash advance.
So far, Kazimirsky, who has worked in business development for other Silicon Valley technology companies, will be the only one in the new California office. But Amirav anticipates that the office with grow. The Lending Express office in Tel Aviv has 25 employees, many of whom – namely the account managers – start their day at 3 a.m. in order to speak to their Australian and American customers in different time zones.
Lending Express uses an algorithmic system called MatchScore to pair borrowers with lenders.
