Author Topic: Interesting Articles...  (Read 939027 times)

Offline CS1

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Re: Interesting Articles...
« Reply #9660 on: December 12, 2018, 02:37:24 PM »
Nice guy gives miles for free tickets for people to fly home for the holidays. This would be cool to make a site for a similar version for Yomim Tovim/Chagim: http://bit.ly/FreeMilesHomeForHolidayTickets

Offline yesitsme

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Re: Interesting Articles...
« Reply #9662 on: December 12, 2018, 11:51:42 PM »
I haven't posted links to parts 2-4 of the Bloomberg series, but they are worth reading (and a connection close to home in part 3 IINM).

Bloomberg has been reporting in recent days that NY's AG is looking into illegal practices, and now DeBlasio is jumping on the PR bandwagon.

http://outline.com/qnDN68 (figured I'd paste a link that can be opened directly rather than using incognito or other methods.

I will be surprised if this results in anything significant.

Similar to what I have suggested in the ELAL late Thursday flights, I think requiring people acknowledge the APR they are paying will go further than a lot of other methods in curbing this abusive and immoral industry.

This topic might merit a thread of its own.
There's no real APR and despite the politics  and optics, pretty much every judge that has ruled on these has found them not to be loans and therefore no interest being charged. The articles are very misleading on this issue. It's an investment in the biz, not a loan, although a very strict one. There is no absolute payment obligation.
There are some bad companies or salespeople perhaps and they should rightfully face consequences if they broke the law.
Moral of the story: read all the terms of a contract before signing and make sure you understand. And if salesperson rushes you, probably stay away

Offline ExGingi

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Re: Interesting Articles...
« Reply #9663 on: December 13, 2018, 01:14:22 AM »
There's no real APR and despite the politics  and optics, pretty much every judge that has ruled on these has found them not to be loans and therefore no interest being charged. The articles are very misleading on this issue. It's an investment in the biz, not a loan, although a very strict one. There is no absolute payment obligation.
There are some bad companies or salespeople perhaps and they should rightfully face consequences if they broke the law.
Moral of the story: read all the terms of a contract before signing and make sure you understand. And if salesperson rushes you, probably stay away
Let me guess: you are in the MCA business.

Now let me ask you some real questions:

1. As an “investment in a business”, there’s a built in IRR on that investment. Is that IRR EVER disclosed or discusswd with the business “accepting the investment”? (And when there's a positive IRR to an investor, there's always a negative IRR - aka APR to the counterparty, even if you don't call it by that name. As the saying goes, those that understand interest - earn it, and those that don't - pay it!)

2. Are business fundamentals (other than recent historical daily cash flow) ever considered in making sense of this “investment”?

3. What percemtage of businesses that fall into the MCA trap actually survive 3 years (or less) later, and gor how many is it just an accelerator of (I'll be generous here) of creative destruction?

4. I will assume at this point that most players don't use a "confession of judgment" in their toolbox. Would you agree that the use of that tool is immoral, and that any reasonable person wouldn't sign it if they would understand what they are signing?

I am not saying that there are illegal activities in all, or even most cases. The Bloomberg series focused mostly on the (ab)use of confessions of judgment. Often the use is perfectly legal based on NY State laws, but that doesn't make it just or moral.

I await your responses to my questions above before I go any further, and suggest that mods move this discussion to its own thread.
« Last Edit: December 13, 2018, 01:18:58 AM by ExGingi »
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Offline ExGingi

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Re: Interesting Articles...
« Reply #9664 on: December 13, 2018, 06:45:25 AM »
I haven't posted links to parts 2-4 of the Bloomberg series, but they are worth reading (and a connection close to home in part 3 IINM).

Bloomberg has been reporting in recent days that NY's AG is looking into illegal practices, and now DeBlasio is jumping on the PR bandwagon.

http://outline.com/qnDN68 (figured I'd paste a link that can be opened directly rather than using incognito or other methods.

I will be surprised if this results in anything significant.

Similar to what I have suggested in the ELAL late Thursday flights, I think requiring people acknowledge the APR they are paying will go further than a lot of other methods in curbing this abusive and immoral industry.

This topic might merit a thread of its own.
Now politicians are chiming in, as well as an industry group.

https://www.bloomberg.com/news/articles/2018-12-13/new-york-lawmakers-say-state-must-stop-enabling-predatory-loans?srnd=premium
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Offline grodnoking

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Re: Interesting Articles...
« Reply #9665 on: December 13, 2018, 06:52:31 AM »


, and now DeBlasio is jumping on the PR bandwagon..

Has this guy ever done anything to benefit us that wasn't for PR?
I'm not who you think I am.

Offline ExGingi

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Re: Interesting Articles...
« Reply #9666 on: December 13, 2018, 07:37:59 AM »

Has this guy ever done anything to benefit us that wasn't for PR?
I don't enjoy puking, so I don't really follow the guy.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline ExGingi

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Re: Interesting Articles...
« Reply #9667 on: December 13, 2018, 07:42:02 AM »
Let me guess: you are in the MCA business.

After browsing through your post history, I guess I might be wrong with that guess. My questions still stand.
I've been waiting over 5 years with bated breath for someone to say that!
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Offline blerbz

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Re: Interesting Articles...
« Reply #9668 on: December 13, 2018, 11:00:43 AM »


Let me guess: you are in the MCA business.

Now let me ask you some real questions:

1. As an “investment in a business”, there’s a built in IRR on that investment. Is that IRR EVER disclosed or discusswd with the business “accepting the investment”? (And when there's a positive IRR to an investor, there's always a negative IRR - aka APR to the counterparty, even if you don't call it by that name. As the saying goes, those that understand interest - earn it, and those that don't - pay it!)

2. Are business fundamentals (other than recent historical daily cash flow) ever considered in making sense of this “investment”?

3. What percemtage of businesses that fall into the MCA trap actually survive 3 years (or less) later, and gor how many is it just an accelerator of (I'll be generous here) of creative destruction?

4. I will assume at this point that most players don't use a "confession of judgment" in their toolbox. Would you agree that the use of that tool is immoral, and that any reasonable person wouldn't sign it if they would understand what they are signing?

I am not saying that there are illegal activities in all, or even most cases. The Bloomberg series focused mostly on the (ab)use of confessions of judgment. Often the use is perfectly legal based on NY State laws, but that doesn't make it just or moral.

I await your responses to my questions above before I go any further, and suggest that mods move this discussion to its own thread.

I'm not in the MCA biz, and I can't tell you all the details in every case but your points 1-3 are imply you think there should be more safeguards in place. I don't necessarily disagree, I'm just saying the articles misrepresent what's actually happening.
As to 4, there's much more to the equation. Collecting on debt is a difficult and drawn out process. There are so many state and federal safeguards in place for debtors that it chokes the creditors very often. I know someone who never bothers paying their bills like medical expenses, etc. because (except for large debts) it is quite easy to make it cost prohibitive  for the creditor to collect without tripping up on one of the oodles of regulations, and you can draw out the process of collection long enough that it's not worth it for them to collect.
Even on large debts that are only minimally contested, it can takes months to get a court to rule on the issues, often a year or 2 or more. That's a big loss for the creditor.
In MCA's (again only when not abused or breaking the law) the biz often is very aware and values a large cash infusion and is very willing to pay the premium. And it helps many so they can expand or buy more goods for holiday season or large equipment that they couldn't otherwise get financed, etc. But when they default there's really no debate about owing it's just a matter of time for the drawn out legal process. With the confession, the creditor can skip all that wasted time of lost opportunity for profit, and simply get the judgment which it will get in court anyway but only after a year or 2 or more.
And yes people have no problem signing it and many know what it is. They are sure they can repay it, and most do. Plus, because the payments are based on actual sales, hence the investment not a loan, if the biz has a slowdown and so long as they don't try to play games, which is how most end up getting into trouble, then their payments can be reduced to reflect actual sales. Many businesses come back over time for multiple cash advances and continue as healthy businesses with an easy but expensive cash source. Everyone is happy there.
My overall point isn't that it's a perfect system. Only that it has its advantages and downsides but the articles and political posturing are misrepresenting reality.

Offline aygart

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Re: Interesting Articles...
« Reply #9669 on: December 13, 2018, 11:05:33 AM »

I'm not in the MCA biz, and I can't tell you all the details in every case but your points 1-3 are imply you think there should be more safeguards in place. I don't necessarily disagree, I'm just saying the articles misrepresent what's actually happening.
As to 4, there's much more to the equation. Collecting on debt is a difficult and drawn out process. There are so many state and federal safeguards in place for debtors that it chokes the creditors very often. I know someone who never bothers paying their bills like medical expenses, etc. because (except for large debts) it is quite easy to make it cost prohibitive  for the creditor to collect without tripping up on one of the oodles of regulations, and you can draw out the process of collection long enough that it's not worth it for them to collect.
Even on large debts that are only minimally contested, it can takes months to get a court to rule on the issues, often a year or 2 or more. That's a big loss for the creditor.
In MCA's (again only when not abused or breaking the law) the biz often is very aware and values a large cash infusion and is very willing to pay the premium. And it helps many so they can expand or buy more goods for holiday season or large equipment that they couldn't otherwise get financed, etc. But when they default there's really no debate about owing it's just a matter of time for the drawn out legal process. With the confession, the creditor can skip all that wasted time of lost opportunity for profit, and simply get the judgment which it will get in court anyway but only after a year or 2 or more.
And yes people have no problem signing it and many know what it is. They are sure they can repay it, and most do. Plus, because the payments are based on actual sales, hence the investment not a loan, if the biz has a slowdown and so long as they don't try to play games, which is how most end up getting into trouble, then their payments can be reduced to reflect actual sales. Many businesses come back over time for multiple cash advances and continue as healthy businesses with an easy but expensive cash source. Everyone is happy there.
My overall point isn't that it's a perfect system. Only that it has its advantages and downsides but the articles and political posturing are misrepresenting reality.
There are likely ways to create a streamlined process without the inequities that seem to be occurring here. First and foremost would be a requirement that the creditor would need to be served papers and be given a set amount of time to respond.
You have the right to remain silent. Anything you say can and will be used to start a religious discussion.

Offline blerbz

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Re: Interesting Articles...
« Reply #9670 on: December 13, 2018, 11:36:04 AM »
There are likely ways to create a streamlined process without the inequities that seem to be occurring here. First and foremost would be a requirement that the creditor would need to be served papers and be given a set amount of time to respond.
That's call a lawsuit. See above.

Offline aygart

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Re: Interesting Articles...
« Reply #9671 on: December 13, 2018, 11:38:08 AM »
That's call a lawsuit. See above.
comeon. There are ways to make a streamlined lawsuit process and you know it.
You have the right to remain silent. Anything you say can and will be used to start a religious discussion.

Offline ExGingi

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Re: Interesting Articles...
« Reply #9672 on: December 13, 2018, 12:47:57 PM »

I'm not in the MCA biz, and I can't tell you all the details in every case but your points 1-3 are imply you think there should be more safeguards in place. I don't necessarily disagree, I'm just saying the articles misrepresent what's actually happening.
I corrected myself above about my initial guess. And I actually think that we are mostly in agreement about many of the issues.


As to 4, there's much more to the equation. Collecting on debt is a difficult and drawn out process. There are so many state and federal safeguards in place for debtors that it chokes the creditors very often. I know someone who never bothers paying their bills like medical expenses, etc. because (except for large debts) it is quite easy to make it cost prohibitive  for the creditor to collect without tripping up on one of the oodles of regulations, and you can draw out the process of collection long enough that it's not worth it for them to collect.
Even on large debts that are only minimally contested, it can takes months to get a court to rule on the issues, often a year or 2 or more. That's a big loss for the creditor.

That is absolutely true, except for your last sentence.

The rate charged (call it discount, APR, profit or whatever you want to) is there and is legitimate in order to compensate for the losses. You seem to know a thing or two about the legal process and about debt collections, as do I.

I would say that well over 90% of (relatively) small debts that go through the legal system, end up in a default judgment, with the debtor never showing up. When they start acting on the judgment, is usually when the debtor starts acting and talking. In cases where the debt has been sold, the companies that buy the debt for pennies on the dollar make a huge profit when they offer settlements to the debtors. Think about it, they buy the debt for anywhere between 10 and 25 cents on the dollar (I would guess that most is bought on the lower end of that scale) and offer the debtors various settlements, trying to get as close as possible to 100% of the original debt, but quite easily going down to 60% or below. At 60% debt recovery, they made a huge profit as long as they weren't dragged through the legal system. I have seen cases where they simply walk away if the debtor does as little as file an answer in court.

In MCA's (again only when not abused or breaking the law) the biz often is very aware and values a large cash infusion and is very willing to pay the premium. And it helps many so they can expand or buy more goods for holiday season or large equipment that they couldn't otherwise get financed, etc. But when they default there's really no debate about owing it's just a matter of time for the drawn out legal process. With the confession, the creditor can skip all that wasted time of lost opportunity for profit, and simply get the judgment which it will get in court anyway but only after a year or 2 or more.
What are you basing your assertions (or assumptions) on? How familiar are you with (both sides of) the MCA business? The cost of the MCA money is extremely high. Unless it's a relatively small amount one time shot, it's hard to believe that many (if any) businesses are that profitable that they could sustain themselves with that cost of money.

And yes people have no problem signing it and many know what it is. They are sure they can repay it, and most do. Plus, because the payments are based on actual sales, hence the investment not a loan, if the biz has a slowdown and so long as they don't try to play games, which is how most end up getting into trouble, then their payments can be reduced to reflect actual sales. Many businesses come back over time for multiple cash advances and continue as healthy businesses with an easy but expensive cash source. Everyone is happy there.
Here again, where are you taking your assertions or assumptions from? Do you have any first-hand knowledge or experience.

I have personally helped a friend who fell onto tough financial times get a loan modification on his mortgage. When he came to me with his business issues, I was initially going to try and help him navigate the legal system, until I saw the confession of judgment. MCAs work with DAILY repayment via EFT withdrawal from the bank. Where did you see the payments being reduced? The only way that happens is by rolling over the MCA into a new MCA, often at a higher cost, but with lower daily repayment.

I also have a relative who runs an MCA shop. I've listened to the phone calls, selling the funds, collecting them, seen the underwriting, etc. So I've seen both sides of these operations from really close up.

My overall point isn't that it's a perfect system. Only that it has its advantages and downsides but the articles and political posturing are misrepresenting reality.
And my points are:

1. MCAs are a financial wild west, and even with a publicly traded large player in the business, there's a lot of bad things going on. There are many smaller sales operations that will use Ondeck (interestingly their website says all over that they provide LOANS) for back-end funding the MCAs, padding it with additional fees. There's zero regulation and tons of abuse, unethical practices, and outright lies by the people marketing the "Cash Advances". Regulation, education, and crack-down are long overdue.

2. Unless someone can prove me otherwise, I would say that an overwhelming majority of MCAs are just additional (or sometimes the last) nails in the coffin of an operating business. However, as someone mentioned upthread, there's fraud on both ends. Since these transactions are underwritten solely on bank cash flows, if someone is able to defraud and misrepresent those, then the MCA company will end up losing.

3. Most people that take MCAs as a source of funding, aren't aware of the APR equivalent being charged, and if they signed a confession of judgment, they definitely didn't understand the ramifications of that. If something similar to a Truth In Lending document (despite the obvious shortcomings of those) would be required to be read out loud by the business taking the funds, I would guess that the landscape would change immensly.


As for the articles and political posturing, well I might have mentioned before that those are amongst the lowest of occupations in my mind, possibly even worse than the people selling the MCAs, so this might be another point where we agree.
« Last Edit: December 13, 2018, 12:56:15 PM by ExGingi »
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