Predatory lenders use arcane Connecticut law to freeze customer money

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A corporate group led by a predatory New York moneylender and convicted drug dealer released from prison last year – and who allegedly threatened customers with cash advances with violence – is using an arcane Connecticut law to freeze the bank accounts of dozens of small businesses across America.

Sounds like a great premise for Martin Scorsese’s next film, but, according to a new Bloomberg Report, it’s real Brooklyn drama.

The crime is paid

High-interest lenders and cash advance companies used to rely on New York courts to freeze their clients’ money using “confessions of judgment.” But these documents – which are essentially confessions signed by a defendant that they owe money – have often been forged, altered or even used against people who did not owe money. In 2019, the state banned their use for out-of-state lending to reduce abuse by predatory lenders.

One of the most prolific users of the confession was Jared Braun, who the New York Attorney General is now prosecuting for scamming cash advance customers, calling him a “modern-day loan shark”. Sources said Bloomberg that a group of companies led by Braun, operating out of his Brooklyn office but not mentioning the name of the convicted drug dealer, turned to Connecticut. There, lenders can ask the courts to freeze customers’ money before they even know it using what’s called a pretrial deposit. Braun was released from prison last year – his sentence was commuted by former President Trump – and these deposits have increased:

  • In 2020, only 32 cash advance prejudices were filed in Connecticut courts, but last year 188 were filed, including 112 by Braun-related companies.
  • Those, with names like Matrix Advance and Gofund Advance, have filed suit against more than 100 small businesses for more than $10 million, often claiming annual interest in excess of 500%.

Shark bite: A pharmacy near Houston had frozen $14,600 in two bank accounts, and one of the companies associated with Braun convinced its owner to add $10,000 to a loan with 700% annual interest to have the funds released .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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