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These stories are so interesting & tragic because the weakness being exploited is that uniquely American breed of optimism... the one that's maybe one part American Dream (capitalist patriotism), one part Jesus (including both the Protestant work ethic and the belief in "deserving") and one part The Secret.

You can't think a fax is a gift from God if you don't think there's a God, for example. And you won't be as predisposed to look at it as a break for you, if you don't think you "deserve" a break (or to be rich, or to be in business at all). And you immediately see the downside of any loan, the second you consider "Hey what if tomorrow isn't more flush than today?"

I do not think that this is something unique or specific to the US. Loan sharks, payday loans, and the consequences exist in many countries of the world.

True, but many countries regulate and limit them much more aggressively than the US typically does (I use "typically" since most regulation is at the state level)

> one part Jesus (including both the Protestant work ethic and the belief in "deserving")

Protestant theology actually says the opposite of "you deserve blessings", historically. The "five solas" of the protestant reformation include "sola gratia" (salvation only by grace - undeserved good treatment), and "solus christus" and "sola fide" make similar points.

Certainly "prosperity gospel" teaching is rampant, but it has very little to do with the Jesus of the New Testament or with historical Protestantism.

> You can't think a fax is a gift from God if you don't think there's a God, for example.

You also wouldn't think that if you read the Bible much.

- Proverbs 13:11 - Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. - Proverbs 22:7 - The rich rules over the poor, and the borrower is the slave of the lender. - Hebrews 13:5 - Keep your life free from love of money, and be content with what you have, for he has said, "I will never leave you nor forsake you."

You can find many examples of professing Christians (or atheists) doing stupid things. That doesn't necessarily mean that Christianity or Jesus is the problem. It's more often that they don't follow what they claim to believe.

I wouldn't have thought Jesus would need defending here, but yes I'm talking more about the convenient reinterpretation of Biblical lessons, than the lessons themselves.

To you and me, it’s about as obvious a red flag as can be. To a struggling small-business owner with a staff of dozens all depending on them for their livelihoods, it’s probably a little bit murkier.

Imagine writing some really bad code under an extremely tight deadline. You know it’s a bad idea, you know it’ll be miserable to maintain, and that it’s a very brittle solution, but you write a few all-caps comments around it and a self-deprecating joke in the commit message, and resolve to refactor it once the deadline has passed.

The process of taking on bad tech debt is very, very similar to the process of taking on bad regular debt.

>> To you and me, it’s about as obvious a red flag as can be. To a struggling small-business owner with a staff of dozens all depending on them for their livelihoods, it’s probably a little bit murkier.

When your payments will be $800 per DAY I don't understand how the cost of having a lawyer look it over is of any consequence.

You know, not everything in life requires a code analogy. This one is particularly egregious because outside of Hollywood I've never heard of code intentionally deceiving its author.

Agreed. This feels a lot like the home lending crisis leading up to 2009. People taking out loans for far more than they could afford with interest only loans, ARMs, etc., or taking out large home equity loans for consumer purchases. What it speaks to is a huge lack of financial literacy.

I do feel for people in this situation, particularly those who are driven to the home equity loans due to unfortunate events, like cancer, in their personal lives. But I feel that it needs to be said that there's a not insignificant number of people who are caught in these situations precisely because they failed to plan and have contingency money set aside, instead spending to keep up with the Joneses.

I mean, specifically the Duncans didn't take on more than they could afford. They were just defrauded.

They were definitely defrauded, but they weren't particularly shrewd here. Pumping the brakes a bit and taking a bit of time to consider all of the legal documentation almost certainly would have saved them. When a deal seems to good to be true, it almost certainly is. Never sign a document unless you fully understand what it is: what rights you're giving up and what legal declarations you're making.

>there's a not insignificant number of people who are caught in these situations precisely because they failed to plan and have contingency money set aside...

and

>due to unfortunate events, like cancer, in their personal lives...

I think it's a bit idealistic to think most Americans can save up to take care of a potential bout with cancer. Particularly if they are unfortunate enough to get certain varieties of cancer.

It's like a Manhattan penthouse. We can save for as long and as hard as we like, but for most Americans that purchase is just going to be out of reach. That's just life here in the US when it comes to cancer. The treatments are expensive and out of reach for most of us. Insurance can make it a bit better, but at the mean, we'll still have some pretty serious problems paying for the treatment.

Perhaps it's not abundantly clear, but I'm trying to draw a distinction there. I get that there are things like cancer that cannot be sufficiently financially prepared for. However, for things like needing a new roof, car tires need replacing, etc., that is precisely what contingency money is for. If you cannot save sufficiently for said expenses, it's time to consider a downgrade on that particular item until you can, or curtail other non-essential expenses for a while.

This isn't quite the same in that the people in question actually repaid far more than they owed. The "loans" were structured in such a way that they don't seem to end in practice, and that when you give in you have to give up your entire financial life.

Conmen look for people who are so desperate they will suspend disbelief. It’s no surprise that all the marks in this story were struggling to save their livelihoods.

I wonder if part of the Yellowstone MO was to use fax? Over email, you have to compete with the Nigerians, Russians etc, somehow fax would seem a little more legit.

Sad story this. I hope the victims can achieve some sort of redress.

To my knowledge, Yellowstone farms out acquisition to a network of tons of shady brokers. So if they do fax spam, Yellowstone's hands are clean. I know of Yellowstone because they are one of the biggest subprime SMB lenders.

That’s clever. It’s interesting how these guys always end up looking like mafia dons, one step removed from the chaos they create.

Conmen look for people who are so desperate they will suspend disbelief.

They look for people who are both desperate and also naive or gullible or unrealistic or something. I spent nearly six years homeless. I was also extremely ill at the time. I absolutely was desperate.

I also refused to be sucked into certain things. No, I was not going to sleep with someone for money and risk getting AIDS, being arrested, etc and having my problems become drastically worse. No, I was not going to accept an offer of temporary housing that came with a huge and obvious downside that well could have left me in much worse straits than I was already in. No, I was not going to make use of homeless services that expected me to leave all my worldly possessions, including my computer that I could not afford to replace, in an unsecured area where anyone could walk off with it.

I looked for options that had clear and obvious benefit without huge fuck you potential.

I’m sorry to hear that but am pleased you seem to have been able to walk away from offers that would have worsened your situation. I hope your savviness is still paying dividends.

FYI, for a 3 month daily debit loan like this, 350% APR means paying $60,000 for a $35,000 loan. This is obviously very high, but it's not the 3.5 * the principle like many people would assume.

How so? You are nearly doubling your money every 3 months. What investments can do that? Crypto? Not guaranteed. Pretty much only usury and actual crime.

My comment was just on how APR is calculated for short term loans.

Also, you only double your money every 3 months if none of your loans default and you collect everything. Most of these loans default. Profits are way slimmer than you're imagining, even for the scammers (Who I definitely agree should be punished for these practices).

Whenever I'm evangelizing the PPACA, I always hit on the regulations around the MLR - the "medical loss ratio", ie, what percentage of premiums are paid back out as medical claims.

One insurance company had a plan with a ten-percent MLR! (Marketing plans that didn't cover anything to college kids, of course.) They took in premiums and kept ninety-percent of it as profit.

principal

Fax spam is super illegal, btw. Heavy fines per fax.

A prior place I worked at paid somewhere around a million of dollars as part of a fax blasting settlement (an employee sent around 1000 faxes iirc). I don't know how this business didn't get nailed to the wall for it, the fines are per fax and crazy.

One errant employee can fax blast once and wreck an entire company.

The problem is the loan brokers in the story are fly by night middleman operations - hard to pin down.

As long as they collect their money from the victims, they can't be too hard to pin down. Sounds more like a bureaucracy issue, falling between the responsibility boundaries of different agencies.

The problem is with how user acquisition is done on the shady side of the industry.

At the top, there's a lender. In this story, the lender is Yellowstone. The lender actually gives money to the customer.

A lender like Yellowstone has 200+ brokers they work with. The brokers are independent companies - "Business Lending LLC" or some generic name.

The brokers do whatever they can to find customers interested in a loan. They package that customers info into a loan application, and send it to Yellowstone. Yellowstone then decides to fund it or not. If they do, the rest of the contact is between Yellowstone and the small business borrower.

How does the borrower know which broker they worked with? Fax letterhead? Fake generic business name. Email of the rep they worked with? Possibly some random gmail. Etc. They get super unlucky and get fined? Declare bankruptcy, make a new company called "Business Lending 2 LLC".

It's not impossible to catch these guys, but it is hard enough to enforce that no current agency is especially interested.

I still assume there are wire transfers of money involved, even if its between the enterprises. The whole point of this activity is criminal profit. There is absolutely no way to anonymously cash out that in 2018 unless transferring out to offshore havens. And often even then, if the US govt throws its weight.

Fine for do not call is very high also.

But those fine/regulation doesn't seem to stop the telemarketers.

Any idea on why that's the case?

The gov agency is not enforce it? The lawyers can't do class action and make $ from filing those cases? Can they file any cases against AT&T or other phone companies? The spammers are outside the US?

Spammers outside the US + it's way too easy to spoof numbers now. Major legislation is needed to fix this, and it is technically fixable.

So, a crazy question.

Who pays in the following situation:

Company A fax-spams people.

Answer: It should be Company A, right? Good.

Now how about in this following situation:

Company A is legit. Person B doesn't like company A, and decides to make fake adverts and fax-spams people using a voip circuit.

Does Company A pay, because it was abut their products in a spammy manner? Or do they find who did it, and try to determine Person B?

Agreed. No one can know the exact way everything played out, but the warning signs are there for the savvy person willing to look for them.

However, I do wonder if their lack of caution may have helped their downfall to begin with. Housing isn't like tech startups. You can't just "grow at all costs" by hiring 50 employees and taking money from anyone and everyone.

There's a saying in New Zealand which describes how the Duncan's got themselves into that situation and their choice of business, "there's always real estate...".

Yeah, the loan sharks are absolutely scammers, and the courts are absolutely corrupt to let this happen, but... there's also an element of "you can't con an honest man" at work here.

It doesn't sound like they were dishonest, just naive.

The only really "dishonest" part involves people "lying to themselves" or refusing to cut the losses when all evidence points to it. All of the anecdotes are basically the same: "business in dire straits, we just need short-term financing to weather the short-term crisis". The people are "lying to themselves" by not making a more honest assessment of the situation. It's easy to read a situation and make a rational judgment when you aren't a participant, but a lot more difficult when it's your business

In what way were the Duncan's dishonest?

They weren't honest with themselves. High interest is difficult to pay. Only luck would have allowed them to pay

Ok, that is a little bit of a stretch for honesty... by that definition, every single shortcoming is actually about not being honest....

They were up to date on their payments. There was no hint they were ever going to default. It's pure supposition - of the blame the victim kind - to imply they were running some kind of inverse scam, even subconsciously, or that they would have stiffed the lender.

The article indicates they had never missed a payment.

'naivety' would probably be better. 'over optimistic'.

Can we just say "Darwins law" and let it be?

In all seriousness... how do you protect naive people from scams like this? I guess my despair is that: you might protect them from this obvious scam. What if the scam is a little more polished?

I think this kinda thing will always happen to gullible folks. I'm not sure what the solution is.

>Can we just say "Darwins law" and let it be?

Only if we are willing to say the same once someone decides to fight back with actual force. If someone outright kills a scammer doing this, are you willing to write it off as "Darwin's law" and let it be?

Wouldn't bother me too much.

At least with conventional scams it’s up to the victim to voluntarily hand over the money to the scammer. In this case it’s different because the government is complicit in the scam and forcefully takes the money from the victim to give to the scammer.

> In all seriousness... how do you protect naive people from scams like this?

In this case, you stop government enforcing the scam.

Confession of judgement should obviously be illegal.

So imagine instead of scammers you had hyenas who lived around a particular stretch of road and ate anyone who wandered by.

You could say "Darwin", anyone dumb enough to get eaten deserves it.

But you could also say "anything that eats people is gonna get shut down hard", because you don't get to be at the top of the food chain if you let things keep eating you.