Small Businesses Get Major Debt Relief in Landmark Settlement
A major victory for small businesses has been achieved, thanks to the efforts of New York Attorney General Letitia James. A staggering $1.065 billion judgment has been obtained against Yellowstone Capital, a cash advance provider accused of predatory lending practices.
The Scheme Uncovered
Yellowstone, which also operates under the names Delta Bridge Funding and Cloudfund, was sued by James last March for deceiving merchants. The company promised to buy specified percentages of future revenue, known as receivables, and offered refunds on loan payments if business slowed. However, instead of honoring these agreements, Yellowstone debited fixed sums from merchants’ bank accounts over 60 or 90 business days, resulting in exorbitant interest rates that often reached triple digits – as high as 820%. This is significantly higher than the 16% usurious rate considered illegal in New York.
Debt Relief for Thousands of Businesses
The settlement brings much-needed relief to over 18,000 small businesses nationwide, with more than $534.5 million of debt being cancelled. This includes $36 million owed by over 1,100 small businesses in New York. Additionally, Yellowstone and its officers will pay $16.1 million as part of the agreement. The company still owes $514.3 million, although it is unclear how this sum will be collected.
A Warning to Predatory Lenders
“Yellowstone and its executives took advantage of vulnerable small businesses, forcing successful companies to close and putting New Yorkers out of work,” James stated. This landmark settlement serves as a warning to other predatory lenders that such practices will not be tolerated.
Ongoing Legal Battle
The lawsuit against Delta Bridge Funding, Cloudfund, and Yellowstone co-founder David Glass is ongoing. Meanwhile, Eric Kanefsky, a lawyer for Yellowstone, expressed his client’s satisfaction with the settlement. Lawyers for Delta, Cloudfund, and Glass have yet to respond to requests for comment.
Previous Settlements
This is not the first time Yellowstone has faced legal action. In December 2023, the company agreed to pay $5.6 million and forgive $21.8 million of debt to resolve claims by New Jersey’s attorney general that it deceived businesses.
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