FTC Takes Action Against Bogus Business Finance Scheme Seek Capital For Costing Small Business Owners Millions

The Federal Trade Commission is taking action against Seek Capital and its founder and CEO, Roy Ferman, for operating a bogus business finance scheme that cost small business owners more than $37 million. According to a complaint filed by the FTC, the… The post FTC Takes Action Against Bogus Business Finance Scheme Seek Capital For Costing Small Business Owners Millions appeared first on TV Delmarva .

The Federal Trade Commission is taking action against Seek Capital and its founder and CEO, Roy Ferman, for operating a bogus business finance scheme that cost small business owners more than $37 million.

According to a complaint filed by the FTC, the company has targeted new and aspiring small business owners looking for loans or lines of credit to open or grow their businesses. While the company’s advertising implies that business owners would have access to cash, instead Seek charges clients thousands of dollars simply to open credit cards in the owners’ names.

“Starting or growing a small business is no easy task and it is made harder by those who deceive small business owners with false promises of liquid capital,” said Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will ensure that all consumers looking for financial products and services, including small business owners, are protected from those who break the law.”

Business owners find Seek when they are looking online for sources of funding to make payroll, buy vehicles and other ongoing expenses involved in keeping a business up and running. According to the complaint, Seek’s ads call the company “the market leader in business loans for small businesses” and the company’s website advertises the “Best Startup Business Loans of 2024.”

The complaint points to numerous other ads and marketing materials from Seek and its lead generators that tout the easy availability of tens of thousands of dollars in “business loans” and “business lines of credit,” with promises that business owners who apply can be pre-approved in minutes.

When business owners express interest in this type of funding, they are contacted by Seek telemarketers, who have told potential clients that Seek was offering “lines of credit” with access to “cold hard cash,” according to the complaint. Seek’s telemarketers use high-pressure sales tactics, including follow-up calls that some business owners have described as “incessant” and “harassing.”

Once business owners sign the contract, instead of procuring business loans or lines of credit, Seek begins applying for numerous credit cards, typically personal credit cards in the name of the business owner. Seek then charges the business owner 10% of the total credit amount on the cards issued—an amount that can total thousands of dollars, according to the complaint.

The business owners never see, sign, or approve any credit card applications that Seek submits on their behalf. The complaint charges that the first time many learn that Seek has applied for credit cards in their name is when they receive an alert about a drop in their credit score, an invoice from Seek listing the credit cards Seek obtained in their name, or a letter from a bank approving or denying them for a credit card. This is also when many business owners first learn of Seek’s hefty fees. According to the complaint, the credit cards are ones that the business owners could have applied for on their own.

If a business owner tries to cancel their agreement with Seek, even before Seek has submitted a single application on the business owner’s behalf, Seek slaps them with an early termination fee of as much as $995, according to the complaint.

The impact of Seek’s conduct is significant for consumers in the midst of starting a new business. The complaint cites one new business owner who said, “…because of Seek’s deceiving practices, I almost went out of business… My business plan got stalled and I did not expand my company as planned… My credit has still not recovered even though it has been almost one year. Seek did not provide the service that it promised. If I had known Seek would only apply for credit cards, I would have never signed up with Seek.”

The complaint also charges that Seek distorts its online ratings by pressuring consumers to provide five-star reviews of the company before they have received any funding, deletes negative consumer reviews, encourages employees to post positive reviews, and in its contracts illegally prohibits clients from leaving negative reviews about Seek.

The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Central District of California.

NOTE: The Commission files a complaint when it has “reason to believe” that the named defendants are violating or are about to violate the law and it appears to the Commission that a proceeding is in the public interest. The case will be decided by the court.

The staff attorneys on this matter are Maya Sequeira and Katherine Worthman of the FTC’s Bureau of Consumer Protection.

The post FTC Takes Action Against Bogus Business Finance Scheme Seek Capital For Costing Small Business Owners Millions appeared first on TV Delmarva .