AG Platkin Settles with Yellowstone Capital for $27.4 Million over Allegedly Predatory Small Business Loans

  • New Jersey AG Matthew J. Platkin announced a $27.4 million settlement with Yellowstone Capital LLC and related entities (collectively, “Yellowstone”) to resolve allegations that Yellowstone’s offers, sales, servicing, and collections of merchant cash advance (MCA) agreements violated the New Jersey Consumer Fraud Act and the state’s Regulations Governing General Advertising.
  • According to the complaint, Yellowstone allegedly marketed short-term, high-cost financing to small businesses as MCA agreements—which typically constitute lump sum payments to purchase a portion of the business’ future receivable at a discount—but that financing actually constituted predatory loans far exceeding the interest rate caps under the state’s usury laws. These unlawful loans allegedly drove small businesses and their owners into default and associated financial distress.
  • Under the terms of the settlement, Yellowstone must forgive the approximately $21.75 million in outstanding balances for all customers who entered into MCAs, pay $5.625 million to the Division of Consumer Affairs, and dismiss any debt collection actions against any customers whose balances were forgiven as a result of the settlement, among other things.