ARTICLE
18 March 2025

FTC Granted Injunction In Small Business Lending Case

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Sheppard Mullin Richter & Hampton

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Sheppard Mullin is a full service Global 100 firm with over 1,000 attorneys in 16 offices located in the United States, Europe and Asia. Since 1927, companies have turned to Sheppard Mullin to handle corporate and technology matters, high stakes litigation and complex financial transactions. In the US, the firm’s clients include more than half of the Fortune 100.
On February 20, a judge for the U.S. District Court for the Central District of California granted the FTC a preliminary injunction against a small business financing company.
United States Consumer Protection

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On February 20, a judge for the U.S. District Court for the Central District of California granted the FTC a preliminary injunction against a small business financing company.

The FTC alleges that the company violated Section 5 of the FTC Act, the Telemarketing and Consumer Fraud and Abuse Prevention Act, the Telemarketing Sales Rule, and the Consumer Review Fairness Act of 2016 for misleading small business owners about the nature of its financial products, resulting in unexpected fees and damage to their credit.

According to the FTC's complaint, the company marketed itself as a provider of business loans and lines of credit but instead applied for multiple personal credit cards in consumers' names. Many small business owners only discovered the scheme after receiving an invoice demanding payment of high fees tied to their newly approved credit limits. The FTC further alleged the company engaged in deceptive advertising and unfair contract terms designed to prevent negative consumer reviews.

The court's injunction freezes the company's assets and restricts its business activities while the litigation proceeds.

Putting It Into Practice: While the CFPB faces uncertainty over its future (previously discussed here), the FTC has continued to be active in the financial services sector. This case reflects the agency's continued focus on small business lending practices, particularly those practices related to deceptive marketing and undisclosed fees.

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