Why a blacklist for commercial loan brokers will or won't work

For many years there have been talks, efforts, and even some limited access blacklists for commercial finance brokers. The efforts stem from the poor business practices, scam artists, and criminals working in the commercial finance industry albeit a small portion of the stakeholders. New laws have been passed and proposed all across the country with more to follow as a result of some of the business practices.

Some of the laws require business loan brokers to register with the state, Virginia being one of them. A registration though as it's designed currently doesn't provide anything except basic contact information about that broker company. This is where a blacklist comes in.

So how would a blacklist be constructed and would it even be useful?

Would there be one blacklist for all the commercial finance related companies or only for specific segments like brokers?

Current Options

There are no legitimate, accessible blacklists for commercial loan brokers that I am aware of nor a website that houses a blacklist or similar functionality. There may be a behind-the-scenes list that people pass around to influence decisions but that doesn’t seem like a legitimate way of doing things. The BBB is almost irrelevant. Review sites like Trustpilot are rarely referenced when researching new partners and they don't have many of the features that I feel are necessary. There are dozens of platforms online where anyone can write about bad players in any industry, Reddit being the largest forum.

I recently come across a Whatsapp Group that was an MCA Blacklist group, created to report all of the scammers in the MCA( aka revenue based finance) industry specifically. I decided to join to see what the group would be like although I was very skeptical. 

In short, it was nonsense. The owner of the Group did not identify himself after being asked several times which was the first red flag. It didn't seem like he had much experience.

With over 150 people in it after a few days, no reports of any sort of scams. It was mostly promoting funding companies, lead services, or other chatter that was worthless.

Surprised? I certainly wasn't. This type of group would only be for the lowest common denominator of people who find entertainment in that environment. Plenty of people sit back and read without participating like myself but there was no real value. No living history could be counted on cause it could be deleted at a moment's notice.

So after some back and forth with the creator of this group where he didn’t abide by his own rules, deleted messages of some, played arbiter of comments, and even threatened people, I moved on. It was worthless and just another group.

Questions to be answered

Many commercial loan brokers and other stakeholders who are in online forums operate with fake names and are willing to change company names as quickly as needed to escape damage done to their online presence. This creates a problem. For a blacklist to work you would need real names to be effective. That is one of many challenges to be solved. Here are others:

How would this all work? Who would be the owner and manage the list? A third party who is not a broker or funder?

Would it be a website where users generate the content? 

Would the real names of the users who report complaints be verified? 

How would the blacklist be accessible?

As a publisher, they could be protected by Section 230 but still could be sued in an attempt to force real names to be revealed. Lawsuits with that intention may not be successful but there are real costs involved.

These questions and many others have to be answered to build anything worthwhile. In the past people who tried a blacklist were unqualified or they did not execute in a way that would constitute a legitimate blacklist.

Funder Intel started with something along the lines of a blacklist with ratings and reviews, good or bad, from user-generated content but decided for several reasons, including some of the above, to do away with all of those features and pivoted to the commercial finance resource, education, and media platform we are now. 

Key things needed

• Credibility of the owner of the list/website 

• Transparency 

• Relevancy of use. For example, if I see someone on the blacklist do I cancel their ISO agreement?

• Resolving complaints of anyone that is mentioned in the blacklist 

• Manipulation of the blacklist 

• Liability of the owner of the blacklist. 

• Is this an actual business? Because it takes money to operate and conflicts of interest can develop when money is at stake.

Some see a blacklist for brokers could be similar to Data Merch, the company that provides a database of merchants who have either defaulted on their MCAs or have had some other problems like fraud reported in their history. I won't go into length about Data Merch as that could be a whole other topic. Sure their data is useful but do funders trust it 100%? It has been said that there is manipulation by users of Data Merch who would report a default just so the client is listed on Data Merch and others would NOT fund them. I can't verify if that is true but I am pointing out potential issues with a blacklist.

Have there been any legal challenges to Data Merch from merchants? 

If a merchant was listed on there incorrectly and they found out it not only prevented them from getting funding but there was slander or defamation then there could be a lawsuit. 

This ties into what the responsibility of a commercial finance broker blacklist would have to deal with. If a broker was listed on it and they felt it was incorrect, they could challenge that in court. Who has the backing to defend themselves on that level?

With all of that said, would any of this have a lasting impact on your business? It could. There are thousands of stakeholders and it's best to know as much as possible about anyone you would potentially work with when hundreds of thousands if not millions of dollars are at risk. For now, you will have to scour the web and see what you can find.