Sign On the Dotted Line to Ensure Your Own Destruction

Photo by Kevin via Flickr (CC BY-ND 2.0)

When small business loans from traditional banks dried up in the financial crisis, people like David Glass of Yellowstone Capital stepped into the breach with usurious loans, structured as cash advances to get around lending regulations, with triple-digit interest rates. And when borrowers can’t repay them — and sometimes even when they can — these lenders take advantage of some arcane New York state law to seize their assets. It’s ruthless, destructive, and completely legal, and Zachary R. Mider and Zeke Faux explain it all at Bloomberg Businessweek

In August, Bush closed his business, laid off his 20 employees, and stopped making payments on his loans. Yellowstone never filed its signed confession in court, but other lenders went after him over theirs. One sunny day that month, he walked to a wooded area near his home, swallowed a bottle of an oxycodone painkiller, and began streaming video to Facebook. To anyone who might have been watching, he explained that he’d taken out cash advances in a failed attempt to save his business. Now the lenders had seized his accounts, Bush said, his voice wavering. One had even grabbed his father’s retirement money.

“I signed ’em, I take the blame for it,” he said. “This will be my last video. I am taking this on me.” He asked his friends to take care of his family, then sobbed as he told his wife and teenage son he loved them.

Someone who saw the video alerted the police. They found Bush unconscious in the woods a few hours later—he credits them with saving his life. But the pressure from his confessions of judgment hasn’t relented. “I wake up every morning afraid what else they will take,” he says. “And every morning I throw up blood.”

Bush’s contracts with Yellowstone show that the company advanced him a total of about $250,000 and that he paid them back more than $600,000. Davis, who parted ways with Yellowstone in August, says he didn’t mistreat Bush or other borrowers and always followed the company’s protocols. “You know why people put the blame on me is because I’m successful,” he says. “It’s just haters.”

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