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"Our Industry Is Absolutely Crazy": The Subprime Wolf Of Wall Street In 125% Interest Clothing

Tyler Durden's picture


The last time we wrote about the number 125% it was in the context of the return of that old Subprime 1.0 staple home loans that cover more than the purchase price of the home (because one must always have some leftover cash for improvements), i.e. 125% loan-to-value mortgages. Today 125% comes back and again it is in the context of subprime, only this time it is about the second coming of the credit bubble when, as Bloomberg writes, a certain group of distinguished individuals is now offering loans to troubled Americans at the whopping annual interest rate of 125%.

Which group of distinguished individuals? The same group that helped make The Wolf of Wall Street into a cult classic: the people who were trained by that born again scammer par excellence Jordan Belfort.

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.

If the phrase predatory lending comes to mind it is because this is precisely what it is:

"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.”


Subprime business lending -- the industry prefers to be called “alternative” -- has swelled to more than $3 billion a year, estimates Marc Glazer, who has researched his competitors as head of Business Financial Services Inc., a lender in Coral Springs, Florida. That’s twice the volume of small loans guaranteed by the Small Business Administration.

Naturally, since these are the kinds of loans that ordinary Americans who don't have defaults and a horrible credit rating would never touch, the probability of repayment is virtually nil. Which means that the probability of default on the new subprime loans is assured, and as such all that is happening is yet another case of credit money assisted wealth transfer: from the very poor to the very aggressive, and increasingly wealthy. In other words, what the Fed has done for Wall Street, subprime 2.0 is doing for its far shadier, and criminal some would say, subsector.

The name of the company that makes the loans is almost too cheese to fit into its own ironic meme:

Naidus, 48, chief executive officer of World Business Lenders, declined to be interviewed. Marcia Horowitz, a spokeswoman at public relations firm Rubenstein Associates Inc., said the company explains loan terms in plain English and takes steps to ensure that borrowers understand.


“World Business Lenders’ sales and marketing techniques, as well as the interest rates it charges and the default rates it experiences, are generally consistent with those throughout the industry,” Andy Occhino, general counsel for the company, wrote in a May 21 letter. “In serving the underserved small-business community along Main Street USA, World Business Lenders complies with all applicable laws and endeavors to ensure a positive experience for its customers.”

To be sure World Business Leaders (or WBL in short) are just that, and much more - you see they are pure humanitarians by nature:

Horowitz, the spokeswoman for World Business Lenders, said the company works with borrowers to avoid defaults.


“If the default cannot be cured, World Business Lenders enforces its rights under the loan documents, including the recovery of the pledged collateral,” she said.

The good news is that at least someone has collateral, unlike all those countries in Europe where the loan itself is the collateral repledged back with the central bank (several times).

Sadly, the only reason why WBL exists is simple: they supply a product that is in great demand...

“While I am not real thrilled about some of the prices being charged, in some cases businesses need to get something done in a hurry and it makes sense,” said William Dennis, who directs the research foundation at the National Federation of Independent Business. “It may not be the world’s best choice, but at least it’s your choice.”


Brokers are popping up around the country to originate loans on behalf of lenders including OnDeck and World Business Lenders. The companies pay fees to the brokers of about $6,000 for finding people willing to take a $50,000 loan, according to current and former brokers, most of whom asked not to be identified to preserve their job prospects.

... a demand that would not exist if the economy was truly, as some of the more humorous economists out there allege, recovering.

As for what the insiders think of their business model, it is the same as what the outsides would have to say:

“Our industry is absolutely crazy,” said Steven Delgado, who left World Business Lenders last year to become an independent loan broker. “There’s lots of people who’ve been banned from brokerage. There’s no license you need to file for. It’s pretty much unregulated.”


David Glass, 39, was still on probation for insider trading when he co-founded Yellowstone Capital LLC, a New York-based brokerage and lender that originated $200 million in loans last year, including for OnDeck.


He said he learned to sell in the 1990s at Sterling Foster & Co., a Long Island firm where he got his friend a job interview that inspired “Boiler Room,” a movie that portrayed a college dropout’s foray into high-pressure stock sales. Glass said he coached actor Vin Diesel on cold-calling for the film. “A natural,” Glass said.

How will all of this end?

World Business Lenders put up job listings seeking former brokers, and they came. A February orientation schedule provided by a former employee shows that training is run by Bryan Herman, who got his start under Stratton Oakmont Inc.’s Belfort, the con man portrayed in “The Wolf of Wall Street.” Herman later ran his own boiler room in the 1990s and avoided jail by informing on other brokers when he was charged with fraud in 1998, court records show. Another salesman was released from prison in 2010 after serving about a year for penny-stock fraud


Herman has paid for his crimes, according to his lawyer, Marty Kaplan.


“It’s really like saying Bill Clinton smoked dope in college,” Kaplan said. “Who cares?”

Indeed: who cares. Certainly not the Fed, for whose erudite members this too will be a perfectly normal occurrence and hardly a signal that something is horribly wrong with its centrally-planned, Frankenstein economy.

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Thu, 05/22/2014 - 15:09 | 4785828 maskone909
maskone909's picture

put me down for two.  i will see you at the bankruptcy proceeding.

Thu, 05/22/2014 - 15:16 | 4785860 Pladizow
Pladizow's picture

Loan wolf shark of Wall St.?

Carefully scour the fine print of the closing documents for the baseball bat to the knee cap clause!

Thu, 05/22/2014 - 15:20 | 4785897 Timmay
Timmay's picture

This is no different than the IMF.....

Thu, 05/22/2014 - 15:23 | 4785922 NoDebt
NoDebt's picture

This is very different than the IMF.  The IMF will take payment in blood.  These guys won't- they just want the cash.

Thu, 05/22/2014 - 15:35 | 4785991 Atlas_shrugging
Atlas_shrugging's picture

We Break Legs

Thu, 05/22/2014 - 15:45 | 4786044 dontgoforit
dontgoforit's picture

A loan for Dumb & Dumber

Thu, 05/22/2014 - 15:54 | 4786091 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

125 % per..... year...... month ........day???

Thu, 05/22/2014 - 16:06 | 4786135 icanhasbailout
icanhasbailout's picture

Does it matter? It's not going to be repaid anyway.

Thu, 05/22/2014 - 16:31 | 4786235 BorisTheBlade
BorisTheBlade's picture

The lucky fucker who gets to pay will pay for himself, the guy next to him and two afterwards. Effective annual rate is about 50% for nominal of 125%. My math is off, but hey who cares, that coke is about to kick in.

Thu, 05/22/2014 - 17:09 | 4786374 MillionDollarBoner_
MillionDollarBoner_'s picture

Check out the UK subprime lenders...3,000% p.a.

Fuckin WBL are minor league compared to Wonga.com...tossers!

Thu, 05/22/2014 - 17:08 | 4786371 de3de8
de3de8's picture

If your that stinkin stupid.....

Thu, 05/22/2014 - 15:25 | 4785928 Grande Tetons
Grande Tetons's picture

Timmay! Nice. 

Thu, 05/22/2014 - 15:26 | 4785942 Son of Loki
Son of Loki's picture


A Loan at only 125%....


I'll take three of them !

Thu, 05/22/2014 - 15:30 | 4785959 IndicaTive
IndicaTive's picture

They make repayment so easy too! From their web site: "WBL loans are repaid through small, daily automatic payments (excluding weekends and holidays) from the borrower’s business checking account. Since our borrowers typically generate income on a daily basis, WBL’s daily repayment program enables businesses to manage their cash more easily than if they were on a monthly payment schedule."

Thu, 05/22/2014 - 15:46 | 4786046 dontgoforit
dontgoforit's picture

Who's the real bottom feeder in this?  The loaner or the loanee?

Thu, 05/22/2014 - 15:50 | 4786076 Almost Solvent
Almost Solvent's picture


Thu, 05/22/2014 - 15:33 | 4785978 Sudden Debt
Sudden Debt's picture

they should run commercials on TV where Obama endorces them while taking a brown enveloppe from the bankers.

Selling weed to solve the deficit, playing robin hood to the poor so he can use them as a human shield and doing some loan sharking on the side!
But the brother can't be connected and his allibi is "I WAS OUT GOLFING MAN!!"

Thu, 05/22/2014 - 15:46 | 4786050 dontgoforit
dontgoforit's picture

Damn man!  That's too funny!  Thanks.

Thu, 05/22/2014 - 15:21 | 4785904 jbvtme
jbvtme's picture

what's the juice on the belgian margin?

Thu, 05/22/2014 - 15:47 | 4786054 dontgoforit
dontgoforit's picture


Thu, 05/22/2014 - 15:15 | 4785867 john39
john39's picture

Usury... the mortal sin that was, and now is not... (Michael Hoffman)


Thu, 05/22/2014 - 15:43 | 4786035 sessinpo
sessinpo's picture

john39   Usury... the mortal sin that was, and now is not... (Michael Hoffman)


Excellent. And I believe the NY has a usury law of 16%. I see lots of litigation and lawsuits in the future regarding WBL.

Thu, 05/22/2014 - 15:52 | 4786082 seek
seek's picture

I'm sure there's loopholes. Most of the usury laws are for consumer and not business loans.

Even then, nothing says you can't set up shop on an indian reservation and bypass everything like they did with consumer loans.

Thu, 05/22/2014 - 15:55 | 4786093 john39
john39's picture

>>indian reservation

funny you say that, both the federal and state governments have cracked down on tribal lending... lawsuits pending across the country in fact.   not sure why, what the motivation for the crack down was, probably protecting campaign contributors...

Thu, 05/22/2014 - 20:29 | 4786990 seek
seek's picture

It was out of control and so far beyond usury that I'm not surprised. They may have been catering to payday lenders or something, but every finance option looks better than the indian loans.

Before they shut down Western Sky was averaging about a 140% APR. And unlike payday lenders, they really were loaning for a year, so that's not some annualized figure.

Thu, 05/22/2014 - 21:06 | 4787075 willwork4food
willwork4food's picture

Around here in SE VA, there are car title loans all over the place. I was working with one client and overheard them quoting the potential customer a max of $5k with a $450 TITLE SUBMISSION FEE-non refundable. Only took newer vehicles and the customer had to own the title and sign it over to them. This was for a 30 day loan, with provisions to extend if needed. For a cost, of course. Unfucking believable.

Thu, 05/22/2014 - 15:14 | 4785856 Bastiat
Bastiat's picture

Oh cool!  That means it will get cheaper still.

Thu, 05/22/2014 - 15:17 | 4785885 Pladizow
Pladizow's picture

What valuable resource is the world not running out of?

Thu, 05/22/2014 - 15:21 | 4785911 TeamDepends
TeamDepends's picture


Thu, 05/22/2014 - 15:25 | 4785932 NoDebt
NoDebt's picture

Supidity, greed, hubris and corruption.

How'd I do?

Thu, 05/22/2014 - 16:22 | 4786200 Peter Pan
Peter Pan's picture

Better than those who voted for you. The question was what VALUABLE resources are we running short of?

Fri, 05/23/2014 - 08:17 | 4787962 N2OJoe
N2OJoe's picture

Those are all extremely profitable to some, and therefore quite valuable.

Thu, 05/22/2014 - 15:26 | 4785936 Peter Pan
Peter Pan's picture

Unused brains

Thu, 05/22/2014 - 16:16 | 4786173 BlackChicken
BlackChicken's picture

Unfit, non qualified leaders?

Thu, 05/22/2014 - 15:16 | 4785870 Spitzer
Spitzer's picture

All above gold is still  availabe. It does not get consumed. Look at  the stock to flows... Gold is not a commodity

Thu, 05/22/2014 - 15:17 | 4785881 Bastiat
Bastiat's picture

One point of the article is that, increasingly, it does get consumed.

Thu, 05/22/2014 - 15:49 | 4786065 sessinpo
sessinpo's picture

Bastiat  One point of the article is that, increasingly, it does get consumed.


Which is a fallacy that the unintelligent don't understand. Gold used can be recycled. It doesn't get destroyed by consumption.

Thu, 05/22/2014 - 16:59 | 4786339 pitz
pitz's picture

Its not really practical to recycle the gold used as plating on various electronic parts, etc.  That gold is forever lost. 

Thu, 05/22/2014 - 16:20 | 4786194 Tinky
Tinky's picture

"All above gold is still availabe [sic]"

Nonsense. It exists, but vast quantities of it are certainly not available.

Thu, 05/22/2014 - 15:47 | 4786053 sessinpo
sessinpo's picture

Bill of Rights    The World Is Running Out of Gold


Yet it seems every week we get a story about India, Russia, or China buying billions in gold. The only ones having trouble with delivery are those that stored their gold with the US government and want it back.

PM dealers were happy to sell you gold, but why, if supply is so strict. Now they are pushing silver in the same manner.


Thu, 05/22/2014 - 23:49 | 4787419 Greenskeeper_Carl
Greenskeeper_Carl's picture

PM dealers make money on the spread. As long as prices don't drop too fast, they are making money. They sell gold and silver for fiat profits, but(the ones I have talked to) mostly save in physical gold and silver. But, as long as they are able to keep getting more from the mints, they sell as much as they can at a slight markup. The place I go had( last friday) eagles, maples, and phiharmonics for 23. iknow one who sells all gold as soon as he can and only holds silver because he fears confiscation. But yes, I've never not been able to buy anything I wanted in this store. Even when every online store was out of every 1/10 oz gold coin made, I was able to pick one up at this store.

Thu, 05/22/2014 - 15:14 | 4785859 Spitzer
Spitzer's picture

Is this the same tit that wrote the book ?

Thu, 05/22/2014 - 15:16 | 4785873 NoDebt
NoDebt's picture

The Mafia has come a long way from it's humble beginnings in smoke-filled rooms and back alleys.  Good to see they still know how to charge a hefty vig and break a few kneecaps when necessary.

Thu, 05/22/2014 - 15:24 | 4785926 Peter Pan
Peter Pan's picture

Thank God Obamacrae will take care of those knees now. But will it cover repeat operations?

Thu, 05/22/2014 - 15:26 | 4785941 NoDebt
NoDebt's picture

Oh, sure it will.  Can't be refused for a pre-existing or chronic condition.  Of course you might have to wait so long to get the operation you'd wish you were eligible for VA benefits instead.

Thu, 05/22/2014 - 15:49 | 4786066 dontgoforit
dontgoforit's picture

There's always disability!

Thu, 05/22/2014 - 15:17 | 4785880 10mm
10mm's picture

Satanic world.

Thu, 05/22/2014 - 15:17 | 4785884 i_call_you_my_base
i_call_you_my_base's picture

“It’s really like saying Bill Clinton smoked dope in college,”

No, it's not at all like that.

Thu, 05/22/2014 - 15:18 | 4785890 delivered
delivered's picture

I work with a number of small businesses and have seen these financing deals first hand. Absolutely brutal as these financing groups (with warehouse loan facilities from big banks that of course are borrowing from the Fed at dirt cheap rates) have no ethics, morals, and/or care for the ultimate survival of the small business. Or in the words of Henry Hill played by Ray Liotta from Good Fellas "Had a bad week, fuck you pay me, weather was crappy, fuck you pay me" or something like that. This industry is beyond what is often referred to as "hard money" as the implied/effective rates are so high that they can exceed even 200% depending on the loan term and structure.

I actually spoke directly with one of these lending groups about their portfolio, tactics, strategies, etc. and it was clear that they simply prey on the smaller, weaker businesses that don't have any idea on how to even calculate the effective interest rate as they simply need the funds too bad. Just another straw adding to breaking the back of small businesses as between loan sharked capital, Obamacare, excessive regulatory and compliance requirements, etc., etc., etc., small businesses are fading fast. 

This is nothing more than legalized loan sharking which is being fueled by the finance industry that has no interest in supporting the growth and development of a small business. Rather, it's nothing more than another tool being used by the finance industry to accelerate the greatest transfer of wealth this country has ever witnessed. 

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