ABC Disposal Creditor Faces Lawsuit over Alleged Predatory Loan Practices

by San Antonio Attorney

ABC Disposal, which declared bankruptcy last year, is alleging that a creditor took advantage of a distressed business and allowed it to borrow funds at interest rates higher than 50 percent.

The company alleges in its bankruptcy documents that Small Business Term Loans, Inc. violated the lending laws in Massachusetts when it used BofI, a federally chartered bank, to issue the first loan, in order to avoid the interest rate limit of 20 percent in the state.

This is referred to as “rent a charter” practice.

The lawsuit seeks for triple damages, restitution and lawyers fees from BFS, whose head office is in Coral Gables, FL. A court hearing on the case is scheduled on Feb. 14.

BFS is expected to file a response to the suit on Feb. 9.

ABC’s problems started when its bank restrict its credit line, forcing the company to obtain payday loans that continually rack up interest rates that are very hard to stay abreast of, the complaint explains.

From October 2014 to December 2015, New Bedford and ABC implemented notes, which includes the BofI notes, accumulating a principal sum of $9,700,000, but the actual amount received from BFS was only $7,277,644, and paid back to BFS $7,730,282. The complaint alleges that aside from the BofI notes’ very high interest rates, the company has paid in full the obligations.

In May 2016, ABC declared bankruptcy claiming that it owed $30 million to about 300 creditors. The company’s operation continues as the case proceeds, and a new plant is set to open this year.

ABC stated in its complaint against BFS that they thought BFS lent them the money, but the promissory notes identified Bofl as the lender.

ABC was caught up in the loans and it was impossible for them to get out of it, the company said.

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