Attorney General Matthew J. Platkin announced today that the State has reached a $27.375 million settlement with Yellowstone Capital LLC, its parent company Fundry LLC, and six other associated companies to resolve allegations that the companies targeted small businesses with unconscionable, misleading, and abusive lending, servicing, and collection tactics that caused financial harm through their merchant cash advance (“MCA”) business. As part of the settlement, all New Jersey customers who entered into MCA agreements with these entities will have their outstanding balances forgiven, worth an estimated $21.75 million. The remaining $5.625 million will be paid to the Division of Consumer Affairs for restitution to certain New Jersey customers, civil penalties, attorneys’ fees, and costs.
The State alleged that Yellowstone Capital and Fundry, as well as Yellowstone-affiliated entities High Speed Capital LLC, World Global Capital LLC d/b/a YES Funding, HFH Merchant Services LLC, Green Capital Funding LLC, MCA Recovery LLC, and Max Recovery Group LLC (collectively, the “Yellowstone Respondents”), acted together to cheat financially-strapped small businesses and their owners out of millions of dollars by luring them into predatory lending arrangements disguised as cash advances on future receivables, effectively charging interest rates far exceeding the interest rate caps in the State’s usury laws.
The State further alleged the Yellowstone Respondents then doubled down on their abuse of merchants through numerous unconscionable, deceptive, and fraudulent servicing and collection practices that drove these small businesses and their owners into financial distress and often default.
“The predatory lenders in this case padded their profits by preying on small business owners struggling to keep their doors open,” said Attorney General Platkin. “Through this settlement we stood up to these illegally-profiteering companies and brought critical financial relief to hard working New Jerseyans.”
“Companies that harm the people of New Jersey with predatory lending schemes will be held accountable,” said Division of Consumer Affairs Acting Director Cari Fais. “Our small business owners should not be subjected to deceptive and unconscionable business practices by those that prioritize profits over their obligations under the law.”
Under the terms of the Consent Order entered by the Division, the Yellowstone Respondents agreed to, among other things:
Dismiss any pending debt collection actions against customers whose balances were forgiven as a result of this settlement;
Provide current customers with enhanced rights to request modifications to their payment terms based on actual receivables;
Improve internal business practices, be transparent in any terms of future MCA agreements regarding fees and reconciliation rights, and give notice to customers before taking legal action to collect on purported unpaid balances; and
Ensure that the Respondents, their principals, and any future business entities resulting from their change in structure, adhere to the terms of the Consent Order.
Assistant Section Chiefs Chanel Van Dyke and Jesse Sierant and Former Section Chief Patricia Schiripo of the Consumer Fraud Prosecution Section in the Division of Law’s Affirmative Civil Enforcement Practice Group handled the Yellowstone matter for the State, with assistance from Deputy Attorneys General Andrew Esoldi, Bryan Sanchez, Erica Salerno, Donna Dorgan, Renee Cadmus, Yale Leber, Deepta Janardhan, Amber Dailey, and Zeyad Assaf, under the supervision of former Assistant Attorney General Janine Matton, Special Assistant to the Director Jennifer S. Schiefelbein, and Deputy Director Jason W. Rockwell. Investigator Walter Kaminski and Supervising Investigator Jennifer Micco of the Office of Consumer Protection handled the investigation for the Division of Consumer Affairs.
Consumers who believe they have been cheated or scammed by a business, or suspect any other form of consumer abuse, whether or not related to predatory lending, can file an online complaint with the State Division of Consumer Affairs by visiting its website or calling 1-800-242-5846 to receive a complaint form by mail.