The Federal Trade Commission (FTC) has taken a significant step by filing a complaint in the U.S. District Court for the Central District of California. This lawsuit targets Seek Capital and its CEO, Roy Ferman. The allegations are serious, claiming that the company operated a bogus business finance scheme that has cost small business owners a staggering $37 million. The FTC alleges violations of multiple acts and requests various forms of relief, including a temporary, preliminary and permanent injunction, monetary damages and more.

Uncovering the Deceptive Practices of Seek Capital

How Seek Capital Targeted Small Business Owners

The company has specifically targeted new and aspiring small business owners who were in need of loans or lines of credit to expand or start their businesses. Their advertising gave the impression that business owners would have quick access to cash. However, in reality, Seek charges clients thousands of dollars just to open credit cards in their names. These are credit cards that the business owners could have easily applied for on their own. This shows a blatant misrepresentation of the services offered.

Seek's ads claim to be the "market leader in business loans for small businesses" and their website advertises being the "Best Startup Business Loans of 2024". Such claims are highly misleading and have drawn the attention of the FTC.

The High-Pressure Sales Tactics Used by Seek

Once business owners express an interest in Seek's products, telemarketers employ high-pressure sales tactics. They create a sense of urgency and pressure the owners into signing contracts. But what happens after signing? Instead of procuring the promised business loans or lines of credit, Seek begins applying for numerous credit cards, usually personal credit cards in the name of the business owner.

The amount charged to the business owner is a significant 10% of the total credit amount on the cards issued. This can add up to thousands of dollars, which is a heavy burden on these small business owners. And to make matters worse, business owners never get to see or approve any of the credit card applications that Seek submits on their behalf.

The Shocking Discovery of Seek's Actions

The first time many business owners become aware of Seek's actions is when they receive an alert about a drop in their credit score. It is also when they receive an invoice from Seek listing the credit cards that Seek has obtained in their name or a letter from a bank approving or denying them for a credit card. This is the moment when they realize the full extent of Seek's hefty fees.

Even if business owners try to cancel their agreement with Seek, even before Seek has submitted a single application on their behalf, they are charged an early termination fee of up to $995. This further adds to the financial distress of these small business owners.

Seek's Distortion of Online Ratings

Seek also distorts online ratings by pressuring consumers to provide five-star reviews even before they have received any funding. They encourage their employees to post positive reviews. Additionally, a document that business owners must sign contains a clause that prohibits them from posting any negative comments, reviews or complaints about Seek for three years. Such clauses are clearly prohibited by federal law.

This shows a blatant attempt by Seek to manipulate public opinion and hide their deceptive practices. The FTC's lawsuit is a crucial step in exposing and stopping these unfair and illegal activities.

The Commission vote authorizing the staff to file the complaint was 5-0, highlighting the seriousness of the matter and the determination of the FTC to protect small business owners.