Fraud Friday – Yellowstone Capital Reaches $27 Million Settlement for Predatory Small Business Lending Practices

January 27, 2023

Delaney Sexton
Contributing Editor

Fraud Friday – Yellowstone Capital Reaches $27 Million Settlement for Predatory Small Business Lending Practices

“The predatory lenders in this case padded their profits by preying on small business owners struggling to keep their doors open,” says Attorney General Platkin. “Through this settlement we stood up to these illegally-profiteering companies and brought critical financial relief to hard working New Jerseyans.”

The State of New Jersey reached a settlement of nearly $27.4 million with Yellowstone Capital LLC, its parent company Fundry LLC, and six other related entities due to allegations of predatory lending arrangements that targeted small businesses.

According to the state, the entities harmed small businesses with “unconscionable, misleading, and abusive lending, servicing, and collection tactics”. Together, the entities allegedly disguised these practices as cash advances on future receivables. Then, the entities charged interest rates that well exceeded New Jersey’s interest cap rates. Their deceptive and fraudulent servicing and collection practices often led small business owners into default.

As part of the settlement, the companies must pay restitution of $5.625 million to the Division of Consumer Affairs to pay for civil penalties, attorney fees, and costs. All customers who entered agreements with the eight entities will have their outstanding balances forgiven, estimated to be worth $21.75 million.

This is not the first of Yellowstone Capital and Fundry’s legal woes. These entities also reached a settlement early last year when the Federal Trade Commission filed a lawsuit. The FTC alleged that ads for their loans contained false or misleading claims that businesses did not need collateral or a personal guarantee. Further, the FTC claimed that the dollar amount included in contracts was larger than what the small businesses actually received because Yellowstone Capital would reduce the contractual amount by adding a variety of fees. Lastly, Yellowstone Capital allegedly continued to withdraw hundreds or thousands of dollars from businesses’ accounts even after customers paid the defendants back in full. More than $9.7 million was sent to small businesses harmed by Yellowstone Capital as part of the settlement.

“Companies that harm the people of New Jersey with predatory lending schemes will be held accountable,” says 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.”

New Jersey Attorney General Press Release
Federal Trade Commission Press Release
Federal Trade Commission Settlement Press Release