Complaint — FTC v. Biz2Credit (S.D.N.Y.)
Archived source: Biz2credit Complaint And Exhibits Pdf B58d1bf3da2c127e. Captured from www.ftc.gov.
Cited in: Biz2Credit · Evan R. Zullow · James Doty · Rohit Arora · Wendy Miller
Full text
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UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
FEDERAL TRADE COMMISSION, Case No. 24-cv-2001
Plaintiff, COMPLAINT FOR PERMANENT
INJUNCTION, MONETARY
v. JUDGMENT, AND OTHER
RELIEF
BIZ2CREDIT, INC., a Delaware corporation, and
ITRIA VENTURES LLC, a Delaware limited
liability company,
Defendants.
Plaintiff, the Federal Trade Commission (“FTC”), for its Complaint alleges:
1. The FTC brings this action under Sections 5(a)(1), 13(b), and 19 of the Federal
Trade Commission Act (“FTC Act”), 15 U.S.C. §§ 45(a)(1), 53(b), and 57b, and the COVID-19
Consumer Protection Act, Public Law 116-260, 134 Stat. 1182, Title XIV, Section 1401
(“CCPA”), which authorize the FTC to seek, and the Court to order permanent injunctive relief,
monetary relief, and other relief for Defendants’ acts or practices in violation of Section 5(a) of
the FTC Act, 15 U.S.C. § 45(a) and in violation of the CCPA.
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JURISDICTION AND VENUE
2. This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331, 1337(a),
and 1345.
3. Venue is proper in this District under 28 U.S.C. §§ 1391(b)(1), (b)(2), (c)(1),
(c)(2), and 15 U.S.C. § 53(b).
PLAINTIFF
4. The FTC is an independent agency of the United States Government created by
the FTC Act, which authorizes the FTC to commence this district court civil action by its own
attorneys. 15 U.S.C. §§ 41–58. The FTC enforces Section 5(a) of the FTC Act, 15 U.S.C.
§ 45(a), which prohibits unfair or deceptive acts or practices in or affecting commerce. The FTC
also enforces the CCPA, Public Law 116-260, 134 Stat. 1182, Title XIV, Section 1401.
DEFENDANTS
5. Defendant Biz2Credit, Inc. (“Biz2Credit”), is a Delaware corporation with its
principal place of business at One Penn Plaza, Suite 3130, New York, NY. Biz2Credit transacts
or has transacted business in this District and throughout the United States. At all times relevant
to this Complaint, acting alone or in concert with others, Biz2Credit has advertised, marketed,
offered, or distributed financing to small businesses throughout the United States.
6. Defendant Itria Ventures LLC (“Itria”) is a Delaware limited liability company
with its principal place of business at One Penn Plaza, Suite 3130, New York, NY. Itria is a
wholly owned subsidiary of Biz2Credit. Itria transacts or has transacted business in this District
and throughout the United States. At all times relevant to this Complaint, acting alone or in
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concert with others, Itria has advertised, marketed, offered, or distributed financing to small
businesses throughout the United States.
COMMON ENTERPRISE
7. Defendants Biz2Credit and Itria (collectively, the “Defendants”) have operated as
a common enterprise while engaging in the deceptive and unfair acts and practices and other
violations of law alleged below. Defendants have conducted the business practices described
below through interrelated companies that have common ownership, officers, managers, business
functions, employees, and office locations. Because these Defendants have operated as a
common enterprise, each of them is liable for the acts and practices alleged below.
COMMERCE
8. At all times relevant to this Complaint, Defendants have maintained a substantial
course of trade in or affecting commerce, as “commerce” is defined in Section 4 of the FTC Act,
15 U.S.C. § 44.
DEFENDANTS’ BUSINESS ACTIVITIES
Background on SBA’s
Paycheck Protection Program
9. The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), Pub.
L. No. 116-136, was enacted to provide immediate, emergency assistance to individuals and
businesses affected by the COVID-19 pandemic. Under the CARES Act, eligible small
businesses could obtain forgivable loans under a temporary, emergency Small Business
Administration (“SBA”) loan program called the Paycheck Protection Program (“PPP” or
“Program”).
10. PPP loans were designed to help small businesses that were struggling, because of
the pandemic, to keep their workers on payroll, as well as cover mortgage interest payments,
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rent, utilities, and other essential expenses. Many small businesses that applied for PPP loans
desperately needed immediate funds to stay afloat.
11. Additionally, unlike most loans, PPP loans could be forgiven if the small business
owners used the loan proceeds for payroll costs and other eligible expenses — thus effectively
transforming the loan into a free federal grant.
12. Lenders authorized by SBA to originate PPP loans could submit consumers’
applications to SBA, which would then assign each application a reference number, called an
“e-tran” number. Once SBA assigned a consumer an e-tran number, the consumer was restricted
from submitting additional applications to other PPP lenders — unless the first lender withdrew
the consumer’s application. Lenders received fees from SBA for every PPP loan they
successfully processed.
13. The PPP was an extraordinarily time-sensitive program, operating on a first-come,
first-served basis. When the Program ran out of funds in May 2021, SBA ceased accepting new
PPP loan applications.
Overview
14. Defendants run an online small business financing operation that advertises a
variety of financing products. Between at least May 2020 and May 2021, Defendants advertised,
marketed, and offered PPP loans to struggling small business consumers in need of immediate
funds as a result of the COVID-19 pandemic. Defendants originated these loans through their
lending arm, Defendant Itria. In 2021, Defendants quickly rose to become one of the ten largest
PPP lenders in the entire U.S., accepting a total of over 500,000 applications in the first 5 months
of that year.
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15. Defendants engaged in a pattern of deceptive and unfair conduct. They falsely
touted that they would process consumers’ applications within an average time frame of “10-12
business days” or, in some instances, “12-14 business days.” In fact, Defendants’ application
processing was riddled with delays, and the average processing time was double what
Defendants claimed, with tens of thousands of consumers waiting over two months for a final
determination. Many of Defendants’ applicants never received funding at all. Defendants also
blocked consumers from withdrawing their applications so that they could apply to other lenders
— frequently ignoring consumers’ repeated and urgent pleas to do so.
Misrepresentations Regarding
the Speed of the Application Processing
16. Since at least February 2021 until at least May 2021, Defendants disseminated
advertisements for PPP loans, or otherwise made statements to consumers, that claimed
consumers’ applications would be processed in a specific period of time.
17. For example, Defendants represented to consumers on their website,
www.biz2credit.com, “Average processing time: 12-14 business days”:
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Exhibit A
Exhibit B
18. In webinar slide presentations to consumers, Defendants made similar claims
regarding the number of days it would take to process consumers’ applications:
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Exhibit C
Exhibit D
19. Additionally, Defendants represented in numerous email communications with
consumers that: “Current wait times are between 10-12 business days.” Defendants also sent
mass email messages to accountants who were assisting small business owners stating, “New
loan submissions should anticipate processing times of 12-14 business days from date of
submission.”
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20. Unfortunately for applicants, Defendants’ representations in Paragraphs 17
through 19 that consumers’ applications would be processed within an average 10-12 or 12-14
business days were false. In reality, Defendants’ application processing was riddled with delays,
technical errors, and other problems — jeopardizing the hundreds of thousands of applications
they had accepted and continued urging consumers to submit.
21. Contrary to Defendants’ timing claims, consumers waited an average of more
than a month (25 business days) for Defendants to make a final determination on their loan
applications. This was roughly double the time Defendants promised in their advertisements.
Additionally, tens of thousands of consumers waited over two months for a final determination
from Defendants.
22. Even consumers who were approved and received loan funds from Defendants
had to wait, on average, at least 50% longer (17 business days) than Defendants had often
promised. And ultimately, roughly 40% of Defendants’ consumers had their applications
cancelled or rejected (by far, the highest rate of any of the other ten largest PPP lenders) —
leaving them without any funding from Defendants at all.
23. Despite these delays, and Defendants’ knowledge of them, Defendants continued
to make their false timing claims to consumers to solicit PPP loan applications until nearly the
end of the Program.
24. These false claims of fast processing were critical for consumers because of the
extraordinarily time-sensitive nature of the Program, and the fact that Defendants’ applicants
were restricted from applying for PPP loans with other lenders. Given that the PPP was a
temporary program that ended when loan funds ran out in mid-2021, many consumers subjected
to these delays lost their opportunity to obtain PPP loans entirely, and suffered damages as a
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result. Further, even to the extent some consumers eventually obtained PPP loans from
Defendants, in numerous instances, these delays damaged struggling small businesses by
depriving them of emergency funds they needed more immediately and could have obtained
through other lenders not making false claims about their processing times.
25. In many cases, during these delays, Defendants failed to provide consumers with
updates regarding their applications, or to respond to consumers’ basic questions or complaints.
For example, one consumer reported:
Biz2Credit approved a . . . PPP loan for my restaurant back in February [2021]. As of
today [May 6], we are still waiting for funds to be deposited into our bank account. . . . We
are in desperate need of these funds. . . . The last time we heard from the[m] was [March
31]. Since then all of our messages have gone unanswered.
Another consumer complained to Defendants that:
I applied for [a] PPP loan with Biz2credit . . . believing loan process would take 12-14 days
as stated on Biz2credit website. After 56 days I’ve yet to receive the funds nor any
meaningful assistance.
In fact, a Biz2Credit employee admitted, during a presentation, that “we do not have the
capabilities to assist anyone individually . . . because we have so many businesses that are
applying.”
26. Defendants knew they were accepting more applications than they could
successfully process within the time frame they touted to consumers. For example, internal
emails in mid-February 2021 state that “[w]e are drinking from the SBA firehose and our
backlog is increasing every day,” which caused Defendants to stop accepting loan applications
for one weekend. After that short pause, however, Defendants decided to “open the application
intake” again. Indeed, very shortly after Biz2Credit re-opened its application intake, SBA began
to send Defendants emails notifying them that Biz2Credit had been flagged as having an
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“elevated number of loans in undisbursed status.” Despite all of this, Defendants continued
inviting the “firehose” of applications and making their false timing claims to consumers.
27. Defendants also knew that consumers were misled by their claims that loan
applications would be processed within an average of 10-12 business days or 12-14 business
days. For example, in a February 25, 2021 email sent to Defendants, a consumer complained
that:
[Y]our website says that processing time takes 12-14 days, but it’s already passed a month
since I applied, then about two weeks ago I’ve received a message that [the] application
has been accepted by the SBA and funds are resolved, and since that moment I haven’t
heard anything from you guys. Just I’m checking out if you are still working on it or I need
to apply with some other lender, because I am worried now, it’s only a month remaining
until the ppp program ends.
Similarly, in a March 8, 2021 email to Defendants, a small business owner stated he “submitted
the PPP application on 1/30/2021 and your website says one can expect an average wait time of
12-14 business days. We are now at business day 25. … I have heard nothing since 2/25/2021.”
Unfairly Blocking Consumers from
Applying to Other Lenders
28. In addition to misrepresenting the time it would take to process consumers’ loan
applications, Defendants often did not allow consumers to withdraw their applications, despite
repeated, desperate pleas from many consumers to do so. As a result, Defendants delayed or
prevented these consumers from seeking and obtaining PPP funds from another lender.
29. Defendants designed their application process to lock in as many consumers as
possible and to block those consumers from applying to other lenders. They did so by rapidly
accepting hundreds of thousands of applications and immediately obtaining SBA e-tran numbers
for those applications before engaging in any real underwriting. For example, early on in the
PPP, internal emails stated that Defendants needed “to change our user experience” to “block”
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consumers’ e-tran numbers (i.e., to obtain these numbers in order to restrict consumers from
applying with other lenders) before reviewing consumers’ documents or other information
necessary to underwrite the applications. In response, Defendants circulated a proposed online
application process that allowed Defendants to “block the user’s E-Tran number quickly.”
30. In numerous instances, during the long delays and lack of communication
described in Paragraphs 20 through 27 above, consumers requested that Defendants withdraw
their applications so that they could seek a PPP loan from another lender. However, Defendants
often ignored consumers’ withdrawal requests. For example, one consumer complained to the
company:
I’ve tried emailing funding specialists, asking them to withdraw my application and notify
the SBA, but they have not. This means I still have an E-tran number from the SBA until
[Defendants] decide[] to tell them to cancel it, and that means I can’t apply with another
lender. I’m basically trapped with this company that rarely responds.
Another desperate consumer complained in late March 2021 to Defendants:
I applied for a PPP Loan with Biz2Credit on Feb 17, [2021].. . . I received my SBA ETRAN
number on Feb 18th and uploaded all of my required documentation . . .. From that point
on I received ABSOLUTELY NO COMMUNICATION from this company. I have
emailed on numerous occasions to different support emails. Called the company but no-
one answers, just says to email and then hangs up. . . . The[y] won’t fund my loan, and they
are holding me hostage because they have my loan so I cannot fund with someone else.
31. Defendants blocked consumers from withdrawing their applications and applying
elsewhere, and were aware of the harm caused by this conduct. For example, one consumer
complained to Defendants:
We have asked to withdraw this application so many times. It has been over a month,
and we don’t understand why the loan is still active with SBA. …You are preventing us
from getting the help that is crucial to our business.
Only after SBA flagged this specific complaint to Defendants did they finally withdraw this
consumer’s application.
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VIOLATIONS OF THE FTC ACT
32. Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), prohibits “unfair or deceptive acts
or practices in or affecting commerce.”
33. Misrepresentations or deceptive omissions of material fact constitute deceptive
acts or practices prohibited by Section 5(a) of the FTC Act.
34. Acts or practices are unfair under Section 5 of the FTC Act if they cause or are
likely to cause substantial injury to consumers that consumers cannot reasonably avoid
themselves and that is not outweighed by countervailing benefits to consumers or competition.
15 U.S.C. § 45(n).
Count I
False, Misleading, or Unsubstantiated Claims Regarding
Application Processing Time
35. In numerous instances in connection with the advertising, marketing, promotion,
or offering of PPP loans, Defendants have represented, directly or indirectly, expressly or by
implication, that consumers’ applications would be processed within an average timeframe of
“10-12 Bus. Days” or “12-14 business days.”
36. In truth and in fact, in numerous instances in which Defendants have made the
representations set forth in Paragraph 35, such representations were false or misleading, or were
not substantiated at the time the representations were made.
37. Therefore, Defendants’ representations as set forth in Paragraph 35 constitute
deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
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Count II
Unfairly Blocking Consumers from
Applying with Other Lenders
38. In numerous instances, Defendants have failed to withdraw or cancel consumers’
applications for PPP loans, despite consumers’ requests to do so, and, as a result, prevented or
delayed consumers from applying with other lenders.
39. Defendants’ actions cause or are likely to cause substantial injury to consumers
that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing
benefits to consumers or competition.
40. Therefore, Defendants’ acts or practices as described in Paragraph 38 constitute
unfair acts or practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45(a) and 45(n).
THE COVID-19 CONSUMER PROTECTION ACT
41. Enacted on December 27, 2020, the CCPA makes it unlawful, for the duration of
the public health emergency declared on January 31, 2020 pursuant to Section 319 of the Public
Health Service Act, for any person, partnership, or corporation to “engage in a deceptive act or
practice in or affecting commerce in violation of Section 5(a) of the [FTC] Act (15 U.S.C. 45(a))
that is associated with . . . a government benefit related to COVID–19.” Pub. L. No. 116-260,
134 Stat 1182, Title XIV, Section 1401(b)(2).
42. The PPP was a government benefit related to COVID-19.
43. The CCPA provides that “[a] violation of subsection (b) shall be treated as a
violation of a rule defining an unfair or deceptive act or practice prescribed under Section
18(a)(1)(B) of the [FTC] Act,” 15 U.S.C. § 57a(a)(1)(B). Therefore, through Section 19(b) of
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the FTC Act, the CCPA authorizes this Court “to grant such relief as the court finds necessary to
redress injury to consumers,” including “the payment of damages.” 15 U.S.C. § 57b(b).
44. Defendants’ violations of the CCPA were committed during the public health
emergency.
Count III
Misrepresentations Associated with a
Government Benefit Related to COVID-19
45. In numerous instances in connection with the advertising, marketing, promotion,
or offering of PPP loans, Defendants have represented, directly or indirectly, expressly or by
implication, that consumers’ applications would be processed within an average timeframe of
“10-12 Bus. Days” or “12-14 business days.”
46. In truth and in fact, in numerous instances in which Defendants have made the
representations set forth in Paragraph 45, such representations were false or misleading, or were
not substantiated at the time the representations were made.
47. Therefore, Defendants’ representations set forth in Paragraph 45 constitute
deceptive acts or practices associated with a government benefit related to COVID-19.
CONSUMER INJURY
48. Consumers are suffering, have suffered, and will continue to suffer substantial
injury as a result of Defendants’ violations of the FTC Act and the CCPA. Absent injunctive
relief by this Court, Defendants are likely to continue to injure consumers and harm the public
interest.
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PRAYER FOR RELIEF
49. Wherefore, the FTC requests that the Court:
A. Enter a permanent injunction to prevent future violations of the FTC Act by
Defendants;
B. Award monetary and other relief within the Court’s power to grant; and
C. Award any additional relief as the Court determines to be just and proper.
Respectfully submitted,
Dated: March 18, 2024
/s/ Evan R. Zullow
EVAN R. ZULLOW (pro hac vice to be filed)
(ezullow@ftc.gov)
WENDY MILLER
(wmiller@ftc.gov)
JAMES DOTY (Bar No. JD1981)
(jdoty@ftc.gov)
Federal Trade Commission
600 Pennsylvania Ave. NW
Mail Stop CC-10232
Washington, DC 20580
Tel: 202-326-2914 (Zullow)
202-326-3571 (Miller)
202-326-2628 (Doty)
Fax: 202-326-2752
Attorneys for Plaintiff
FEDERAL TRADE COMMISSION
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Exhibit A
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Exhibit B
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Exhibit C
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Exhibit D
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