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New York Attorney General Letitia James announced a $1 billion settlement with Yellowstone Capital, a defunct cash advance company, over allegations of predatory lending practices. The settlement, announced on Wednesday (January 22), resolves a lawsuit that accused Yellowstone of targeting over 1,100 small businesses in New York and more than 18,000 nationwide with exorbitant interest rates and harsh repayment terms.
Yellowstone Capital, headquartered in Jersey City, New Jersey, controlled a network of 25 companies that issued loans disguised as merchant cash advances. These loans were supposed to be flexible, based on a portion of future revenues, but instead, Yellowstone collected fixed amounts directly from businesses' bank accounts, leading to crippling debts.
Under the settlement, Yellowstone will cancel more than $534 million in outstanding debts and pay $16 million in restitution to affected businesses. The company remains liable for an unsatisfied $514 million portion of the judgment. The settlement does not admit liability or wrongdoing, but it marks a significant step in addressing the harm caused to small businesses.
Attorney General James emphasized the impact of these predatory practices, noting that businesses like City Bakery in Manhattan were forced to close due to daily repayments exceeding $2,000. James stated, "Targeting small businesses with predatory loans and outrageous interest rates threatens the livelihoods of hardworking business owners and their employees."
The settlement follows previous legal actions against Yellowstone, including a $9.8 million settlement with the Federal Trade Commission in 2021. The Attorney General's office will continue litigation against companies that took over Yellowstone's operations, such as Delta Bridge Funding and Cloud Fund.