The Federal Trade Commission (FTC) has filed a lawsuit against Seek Capital and its CEO Roy Ferman for allegedly operating a deceptive business finance scheme that caused significant financial harm to small business owners. According to the FTC’s complaint, the company’s fraudulent practices have resulted in more than $37 million in damages to small business owners across the United States.
Seek Capital, a financial services company that claims to offer business loans and lines of credit, has been accused of misleading business owners into paying for services they did not receive. The complaint alleges that Seek Capital misrepresented its offerings, falsely advertising itself as a provider of business loans or credit lines to help entrepreneurs cover operational costs like payroll and purchasing equipment. Instead of delivering the promised funding, Seek Capital applied for multiple credit cards in business owners’ names and charged them substantial fees for these credit cards, which they could have obtained on their own.
The Scheme and Its Deceptive Practices
Seek Capital primarily targeted small business owners who were in search of loans or lines of credit to fund their ventures. The company’s marketing materials, including online ads and telemarketing calls, portrayed Seek Capital as the “market leader in business loans for small businesses” and advertised “Best Startup Business Loans of 2024.” These misleading messages suggested that business owners would have immediate access to substantial capital to support their operations.
According to the FTC’s complaint, once business owners contacted Seek Capital in response to these ads, they were pressured by high-pressure sales tactics employed by Seek’s telemarketers. These representatives misled clients into believing they were being offered significant lines of credit with “cash in hand,” when, in reality, the company was only applying for credit cards on the business owners’ behalf—often without their knowledge or consent.
Financial Impact on Business Owners
Business owners who entered into contracts with Seek Capital were charged significant fees—up to 10% of the total credit limit of each card issued. In some cases, the charges amounted to thousands of dollars. Importantly, many of these business owners were not even aware that the applications for credit cards had been submitted in their names until they received a credit alert or an invoice from Seek Capital listing the credit cards obtained.
The FTC’s complaint highlights several examples of how the company’s deceptive practices caused severe financial and emotional distress. One business owner stated that their business nearly went bankrupt due to Seek’s misleading practices, stating, “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.”
The complaint also underscores how many business owners would have been eligible for the same credit cards through direct applications, without paying the steep fees charged by Seek Capital.
Aggressive Tactics and Restrictions
The complaint also details Seek Capital’s aggressive and unethical sales tactics, including incessant follow-up calls to potential clients, often described as “harassing” by business owners. Moreover, the company allegedly forced clients into unfair contracts with excessive early termination fees of up to $995 for those who wished to cancel before Seek Capital had even submitted a credit card application.
Additionally, the company engaged in fraudulent practices related to online reviews, including pressuring customers to submit five-star reviews before they had received any service, removing negative feedback, and even encouraging employees to write glowing reviews. Seek Capital’s contracts allegedly contained illegal clauses that prohibited clients from leaving negative reviews about the company.
Legal and Regulatory Response
The FTC has accused Seek Capital and its founder Roy Ferman of violating several provisions of the FTC Act, including unfair and deceptive advertising practices and the misrepresentation of financial products. The agency emphasized that such practices have significant consequences for entrepreneurs, particularly those trying to secure funding for new businesses, which are already under financial strain.
FTC Director of the Bureau of Consumer Protection Samuel Levine stated, “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. 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.”
The case was filed in the U.S. District Court for the Central District of California, and the Commission has voted unanimously to proceed with the case, with a 5-0 vote authorizing the staff to file the complaint.
Impact on the Small Business Community
The allegations against Seek Capital reflect broader concerns about the increasing prevalence of predatory financial services targeting small businesses. Entrepreneurs, especially those in the early stages of establishing their companies, often face challenges in securing adequate funding. As such, they are particularly vulnerable to schemes that promise quick access to capital but deliver little value in return.
The FTC’s action underscores the agency’s commitment to protecting consumers and holding deceptive financial services providers accountable. Business owners who have been affected by Seek Capital’s practices may be eligible for compensation or restitution, depending on the outcome of the case.
Key Takeaways
- Seek Capital is accused of defrauding small business owners out of more than $37 million through misleading marketing and the application of credit cards in clients’ names.
- Business owners were charged exorbitant fees for credit cards they did not apply for and were misled into believing they were securing business loans or lines of credit.
- Seek Capital employed high-pressure sales tactics, restricted consumers’ ability to cancel agreements, and manipulated online reviews to present a false image of its services.
- The FTC is pursuing legal action to protect consumers and prevent further harm to small business owners seeking financial assistance.
The case against Seek Capital serves as a stark reminder to entrepreneurs to thoroughly vet financial service providers and be cautious of any company promising quick and easy funding, especially when such promises sound too good to be true.
For more information on the case or to file a complaint, small business owners and consumers are encouraged to visit the FTC’s website or contact the agency directly.
