In a landmark decision, the Federal Trade Commission (FTC) has obtained a judgment requiring former merchant cash advance operator Jonathan Braun to pay $20.3 million in monetary relief and civil penalties. This judgment, following the first trial by jury conducted by the FTC, represents a significant victory for consumer protection in the financial services industry.
The trial, held in January, found Braun, associated with small-business funding company RCG Advances, guilty of knowingly violating the Gramm-Leach-Bliley Act, a critical law governing consumer financial privacy. The jury determined that Braun deceived small businesses about the funding provided by his company, leading to a judgment of $3,421,067 to compensate affected small businesses.
Moreover, the court imposed $16,956,000 in civil penalties against Braun for his “utter disregard and contempt” for consumers, which included the use of threats and profanities against small business owners. Samuel Levine, director of the FTC’s Bureau of Consumer Protection, underscored the agency’s commitment to safeguarding small businesses, emphasizing that the $20.3 million judgment sends a clear message that deceitful practices will not be tolerated in the marketplace.
The FTC initially filed a lawsuit against Braun and four other defendants in June 2020, alleging deception of small businesses, misrepresentation of merchant cash advance terms, and unfair collection practices, including threats of physical violence. Braun and the defendants were accused of making unauthorized withdrawals from consumers’ accounts and requiring businesses to sign confessions of judgment as part of their contracts, allowing unlawful seizure of assets in case of alleged default.
In October 2023, the court issued a summary judgment decision and permanent injunction against Braun, banning him for life from the merchant cash advance and debt collection industries. Other defendants in the FTC’s case had previously settled, resulting in industry bans and over $2 million in monetary relief for affected small businesses.
RCG Advances, Braun’s company, was among several firms targeted by federal and state authorities in August 2020 for allegedly lending money to small businesses at exorbitant rates and employing aggressive debt collection tactics.
The judgment against Jonathan Braun and RCG Advances underscores the FTC’s commitment to upholding consumer rights and ensuring fair and transparent practices in the financial services sector. As regulatory scrutiny intensifies, this landmark decision serves as a stern warning to companies engaging in deceptive practices, reaffirming the FTC’s role as a vigilant guardian of consumer interests.