Staying Vigilant in the Funding Business

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There’s a lot of funny business going on these days, so here are some things for you and your merchants to look out for:

The LOC Bait and Switch
A scammer offers the customer an impossibly good deal on a line of credit that is contingent on first entering into some other product. After the customer enters into the first transaction, the LOC offer and the scammer disappear. If your customer is susceptible to falling for something like this, make sure to advise them ahead of time accordingly.

The Mystery Funder
Despite a customer claiming to work exclusively with you as a broker, at some point a third party mysteriously enters the process and offers a separate deal to them to compete with you. Although there could be many reasons for this happening both legitimate or otherwise, including the customer not being completely forthright about exclusivity, you should communicate with your customer beforehand about who or who not to expect a communication from. Also, there are methods you can use to mitigate this by plugging up common attack vectors like an email address or phone # on a submitted application. Allow an attorney to guide you on how to do this most effectively and legally.

The Debt Advisor
Beware the debt advisor who claims they are there to help a merchant reduce the obligations of their loans or advances as many do not understand the contracts they claim to advise on. Because of this, they can potentially push a customer into a much worse situation than they otherwise might’ve been in. A merchant’s best bet is to communicate directly with the source of capital on their own. Oftentimes a contract spells out the proper protocol to follow depending on what the situation is.

They got hot full packs for sale including bank statements, social security #s, and other data ready to send your way! Before engaging in any such transaction, please consult with an attorney about the potential implications of doing something like this. Same goes for you if you were thinking about “selling your declines.”

The Ghost
Brokers often complain about customers falling for obvious scams over the phone, including the classic LOC scam, however, brokers can be just as susceptible to the same tactics. Before working with any lender or funder, you should conduct a full range of due diligence on them. This includes investigating their precise address, who the owner is, what their background is, what their ISO contract says, what their merchant contract says, etc. Too often brokers are drawn in by a commission they believe they stand to make and a smooth talking biz dev rep they talked to on the phone and skip over all the fundamentals. If the funder turns out to be a scammer, then you’ve potentially placed customers with that scammer and put yourself doubly at risk. A commission isn’t worth waiving due diligence. The stakes are too high for this industry.

Last modified: April 16, 2024
Sean Murray

Category: Industry News

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