You borrow some money.

You're paying it back.

Maybe you've fallen behind, maybe you haven't.

And then one day out of the blue,

you can't get any of your money out of the bank.

Your accounts are locked up.

They've been seized without any notice to you.

This is happening to small business people

across America every day.

And it's enabled by an obscure document

called a confession of judgment.

It just kept getting worse, there was no money left.

I was ready to take my life to clear everybody else.

I'm Zach Mider, I'm a reporter at Bloomberg News.

I'm Zeke Faux, I'm a reporter for Bloomberg News

and Business Week Magazine.

And we're the ones who wrote

Sign Here to Lose Everything.

This is an extraordinary period for America's economy.

We've seen triple digit swings in the stock market.

Major financial institutions have teetered

on the edge of collapse and some have failed.

After the financial crisis a decade ago,

a lot of small businesses needed loans

and they couldn't always get them from traditional banks.

Instead people who stepped in were called

cash advance companies.

These guys call businesses across the country

and they're offering quick money and they say that

if you're in tight spot they can get you 50, a hundred

grand overnight.

The loans are very expensive, with interest rates as high as

300 or 500 percent annualized.

That's 20 times as much as you'd pay on a credit card.

The merchant cash advance industry has attracted

all sorts of characters because of the potential

to make a quick profit.

So there are cash advance brokers with convictions for

drug smuggling, stock fraud.

If you go and talk to someone in the shady side

of Wall Street, the odds are, they either work

in cash advance, or they've considered it.

One of the biggest companies

in the cash advance space is Yellowstone Capital

and it was actually founded by this guy David Glass.

I didn't get to where I am today

by losing my client's money.

Glass actually served as the inspiration

for the classic stock scam movie Boiler Room.

You call me when the stock doubles alright?

Glass heard about this cash advance boom

and started Yellowstone.

And it quickly grew to be one of the biggest

cash advance brokerages.

They're lending to small businesses.

Picture like a plumber, an electrician, or a shopkeeper.

But they realize quickly that some businesses

were taking loans and then just

stealing the money essentially.

Like they had no intention of paying it back.

So a lawyer, working for Yellowstone and some other

cash advance companies, had an idea that they could revive

this age old practice called confessions of judgment.

A confession of judgment is something

that the borrower signs as a condition of getting the loan.

It basically means they give up their right

to be heard in court.

So later on if they miss a payment,

or even if the lender wants to claim they missed a payment,

it doesn't have to be true, the lender can go to court

with this confession of judgment, which gives them the power

to raid the borrower's bank account.

Confessions of judgment aren't even valid in many states.

But New York state law allows this practice.

The borrowers are all across the country.

Cleveland, or Topeka, Kansas, or Los Angeles,

but typically they're all required to sign

a confession of judgment that's valid in a New York court.

When you stop and think about it,

it's crazy that a borrower would admit in advance

to not paying back a loan, when they haven't even

received the money yet.

It was so illogical, I really wanted to know more.

We thought about, uh maybe we should do a story,

but we didn't have a sense of the scale.

Like is this something that's used a lot?

And we ultimately found like more than 25,000

of these judgments filed in the last coupla years.

They were being used to go after borrowers

all over the country.

And Yellowstone was filing these things

at a rate of like several a day.

This system has no safeguards.

We found lots of borrowers who said that

confessions of judgment were filed against them

when it was not warranted, or the cash advance company

seized more money than they were owed.

We found, after talking to borrowers, that a lot of them

had had their lives turned upside down

by confessions of judgment.

My name is Jerry Bush, Jr., I basically was a plumber

for about 30 years.

Jerry Bush ran a plumbing business with his father,

near Roanoke, Virginia.

And the company got a lot of jobs,

but he had cash flow problems

and he started taking these cash advances.

The confession of judgment that was part of the contract

that you had to sign and they have very high interest rates,

but we needed money.

So he kept taking more and more of these loans

in order to get the money to pay the loans he already had.

It got to be so bad that he was paying back $18,000 a day

at one point.

So I hada close doors because there was no way

I could make the payments.

The way these contracts work, the cash advance companies

shouldn't be able to go after someone to collect

if their business fails.

But because Jerry had signed these confessions of judgment

the cash advance companies went after him.

They got my father's retirement money.

They took it out of my son's account, which he was 17,

but they said my name was on the account.

So they took all his savings.

I kept gettin' calls.

One funding company told me, he said you have two ways out.

Win a lottery, or die.

I took the chance and I was ready to take my life

to clear everybody else.

He took a lot of pain pills, walked out into the woods

near his house and recorded a video in which he said goodbye

to his son and wife.

They found him and took him to the hospital.

I'm survivin' every day.

My hope is that they will stop these

confessions of judgments.

I write to senators, Congress, almost every week

and I'm just hopin' we can get some laws passed.

After we filed the story in November of 2018,

we got quite a lot of response from government officials.

On the federal level, members of Congress in both chambers

have filed legislation to end the practice of

confession of judgment nationwide.

In New York, the state Attorney General has opened

an investigation and among the companies they're looking at

are Yellowstone Capital.

This is a story that needed a light shone on it actively

by the press.

If we hadn't published it when we did, you wouldn't see

the official reaction that you see now.

But while that's going on, people are still having

confessions of judgment filed against them everyday.

If you look up Yellowstone Capital, you can see their

salesmen on Instagram posting pictures of their

Lamborghinis, diamond watches, fancy vacations,

so they seem to be doing great.

Even if confessions of judgment go away,

there are all kinds of other abusive practices

in the cash advance industry.

From brokers signing customers up for loans

they don't really want, to lenders tryin' to collect money

they were never owed.

So you're probably gonna be hearing more about this industry

for years to come.