Cleveland baseball player alleges league engaged in predatory lending
Inside Subprime: May 8, 2018
By Holly Kane
Francisco Mejía, a 22-year-old catcher from the Dominican Republic who went pro in 2017, is claiming Big League Advance used “unconscionable” tactics to get him to sign a contract wherein he promised 10 percent of his future earnings in exchange for $360,000 to help with his mother’s medical bills.
According to a lawsuit filed in Delaware in February, Mejía says that the three contracts he entered into with Big League Advance in September, November and December of 2016 were the result of “wrongful and unconscionable conduct” and is asking that the contract and payment be voided.
In a counterclaim filed in April, Big League Advance denied any knowledge of Mejía’s family and requested the player be prohibited from disclosing any information about their contract.
Using what ,” Big League Advance handed over the cash in exchange for 10 percent of what is projected to be $100 million, resulting in a $10 million return on a $360,000 principal.
Although the complaint alleges “exploitation of an underprivileged, unsophisticated borrower,” the company’s website compares its practices to “many venture capital funds in Silicon Valley,” in which small companies receive investments and only pay them back if they are successful. Big League Advance explicitly states that it is not a payday loan company.
With predatory lending practices at the forefront of Ohio legislation, payday loans in Cleveland are a hot-button issue. According to Pew Charitable Trusts, Ohio boasts the highest payday loan rates in the country, and Ohioans pay more in fees than residents of any neighboring state, which suggests that such rates are unnecessarily high when compared to other economies in the region.
State legislators attempted to reform payday loan practices in 2008 with the Short-Term Loan Act, but industry players got around the regulations by operating as “credit service organizations,” which are not subject to fees, according to the Plain Dealer.
However, good news may soon be on the horizon for cash-strapped Ohio borrowers, as the state House recently approved stalled payday lending legislation that would limit payday lending APR rates to 28 percent, and cap the maximum loan amount at $500.
Activists claim payday loan companies take advantage of high rate caps in states like Ohio, charging exorbitant fees that result in deeper levels of debt for the borrower. Similarly, Mejia’s lawsuit says Big League Advance “is in the business of loaning money to up and coming (sic) yet financially struggling, foreign baseball players.”
Big League Advance founder and former Philadelphia Phillies pitcher Michael Schwimer denied any wrongdoing in an interview with ESPN, saying Mejia fully understood the terms of the contract.
“Players receive capital – not loans – and a player keeps the funds whether or not he ever makes it to the major leagues,” Schwimer said.
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