Wall Street Finds New Subprime With 125% APR Business Loans
Source: Bloomberg
Doug Naidus made his fortune selling a mortgage company to Deutsche Bank AG months before the U.S. housing market collapsed. Now he’s found a way to profit from loans to business owners with bad credit.
From an office near New York’s Times Square, people trained by a veteran of Jordan Belfort’s boiler room call truckers, contractors and florists across the country pitching loans with annual interest rates as high as 125 percent, according to more than two dozen former employees and clients. When borrowers can’t pay, Naidus’s World Business Lenders LLC seizes their vehicles and assets, sometimes sending them into bankruptcy.
Naidus isn’t the only one turning to subprime business lending. Mortgage brokers and former stock salesmen looking for new ways to make fast profits are pushing the loans, which aren’t covered by federal consumer safeguards. Goldman Sachs Group Inc. (GS) and Google Inc. are among those financing his competitors, which charge similar rates.
“This is the new predatory lending,” said Mark Pinsky, president of Opportunity Finance Network, a group of lenders that help the poor. “And the predators, just as they did in the mortgage market, have gotten increasingly aggressive.”
Read more: http://www.bloomberg.com/news/2014-05-22/wall-street-finds-new-subprime-with-125-business-loans.html
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