The Star-Ledger

The EDA Gave Tax Breaks To A Predatory Lender, Group Says

That's Why The State Agency Needs To Be Overhauled.

The Star-Ledger — May 13, 2018

By Phyllis Salowe-Kaye
Star-Ledger Guest Columnist

Last week, corporate whistleblower Kerrie-Ann Murray testified that her former employer falsified payroll paperwork to facilitate a move to New Jersey and obtain $16.8 million in tax credits from our state Economic Development Authority. The company, Jersey City-based World Business Lenders, then laid off an entire department after selling that tax credit to a third party.

Murray's testimony is yet another example of the level of waste and corruption involving EDA's corporate tax incentive program. What's even more troubling was that the EDA considered an application from World Business Lenders at all.

By now, we've all seen how companies connected with political power broker George Norcross benefited from the EDA's corporate tax breaks. This particular company appears unaffiliated with the Norcross machine. But the EDA did gift millions of taxpayer dollars to a corporation that actually harms New Jersey's economy, its small businesses and its taxpayers.

At first glance, this seems the kind of company you want to persuade with tax incentives to do business in New Jersey. World Business Lenders claims to be a non-bank lender dedicated to serving the needs of small business owners, in particular minority-owned main street businesses unable to obtain credit or loans from banks.

But a close examination of the company history, and Kerrie-Ann Murray's testimony, shows it's the worst kind of subprime predatory lender, preying on vulnerable business owners who need quick access to capital. World Business Lenders makes profits off bad credit, defaulted loans, and the misery of bankruptcy. It's the kind of company that destroys small businesses and local economies.

Company founder Doug Naidus made his fortune by selling a mortgage company to Deutsche Bank, a financial outfit responsible for servicing and foreclosing on many of the subprime loans that fueled the world financial crisis. Since then, Naidus has perfected a new kind of predatory lending — this time targeting small business owners. As a non-bank lender his company is subject to less regulatory oversight than banks, and that's reflected in its business practices.

World Business Lenders charges interest rates as high as 125 percent, with daily loan repayments sometimes running to more than $160 per day for small business owners. Borrowers have put up cars, houses or even livestock as loan collateral. When unable to pay, the company has seized these assets, forcing bankruptcies and ruining lives. "They're in the business of helping these businesses fail," said Mark Pinsky, former president of Opportunity Finance Network, a national association of community development financial institutions. Nadius himself once joked that he could save his company money by paying salesmen in repossessed Pontiacs.

It comes as no surprise that a company as unscrupulous as World Business Lenders hired more than 100 low-paid unqualified workers to handle subprime loans, falsified their payroll paperwork, then laid them off once the move to New Jersey was complete and the tax credits sold. What's shameful is that the EDA even considered an application from the company, which exemplifies the worst of fintech predatory lenders. How could EDA leadership approve an application from a company that profits by destroying other companies?

New Jersey shouldn't be helping businesses like this make millions of dollars — it should be aggressively cracking down on practices that hurt local businesses and the communities in which they do business. New Jersey Citizen Action and our allies have been calling for stronger and expanded federal and state regulation, oversight and accountability for non-banks and fintech lenders like World Lending Business since the financial crash of 2008. Consistent lending standards, transparency in pricing and terms, responsible underwriting and protections against expensive debt trap cycles of re-borrowing are desperately needed.

Small business borrowers should at least be able to trust companies doing business with the EDA. By awarding World Business Lenders corporate tax credits and facilitating their move to New Jersey, the EDA leadership steered small businesses in our state to a predator engaged in unfair, deceptive, and abusive lending practices.

New Jersey can't afford such irresponsible governance. For this reason, we again echo calls for the agency to be overhauled, for its corporate incentive program to be scaled back and for EDA board members who have been asked to resign to step down.

Phyllis Salowe-Kaye is the executive director of New Jersey Citizen Action.

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