A group of so-called merchant cash advance companies accused in a lawsuit of operating a predatory lending enterprise lost a tactical maneuver to force hundreds of small-business owners to fight them one-on-one.
The borrowers signed loan agreements that included provisions barring them from participating in class-action lawsuits.
But those waivers, along with the rest of the contracts, may be void if their terms are found to violate New York’s lending laws, as the borrowers allege, US District Judge
A lawyer for the lenders, Jordana Haviv, said the judge’s ruling reflected “an extremely plaintiff-friendly standard.”
The racketeering
The lenders are accused of preying on small businesses by persuading them to sign one-sided contracts that obscured “the fact that the transactions are usurious loans with interest rates often exceeding 500%.”
The borrowers say the lenders were being advised and directed by Jonathan Braun, who was imprisoned on drug charges when Trump commuted his 10-year sentence shortly before leaving the White House in January 2021. Braun isn’t named as a defendant in the suit.
Now that Rakoff has turned away a pre-emptive bid by the lenders to block the borrowers from banding together, the judge must still decide whether the claims belong in a class action.
Haviv said Wednesday’s ruling recognizes the borrowers “bear a heavy burden” to show they’re entitled to class-action status.
“We look forward to demonstrating that not only is class certification inappropriate, but liability is too,” she said. “Our clients’ agreements are factoring agreements, not loans.”
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Peter Blumberg, Tina Davis
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