New Jersey is the most recent state to hit Merchant Cash Lenders with a hefty $27.375 million settlement resolving issues that were alleged to include the MCA companies targeting small business with unconscionable, misleading, and abusive lending, servicing, and collection tactics. All points that our clients unfortunately know of too well. Yellowstone Capital LLC, its parent company Fundry LLC and six other associated companies were the ones involved in this particular settlement. Yellowstone, of course is one of the more well-known and notorious lenders in this industry having already settled with the FTC previously. All New Jersey customers who entered into MCA agreements with these entities will see their debts forgiven. The MCA companies will pay an additional $5.635 million in restitution to the New Jersey Division of Consumer Affairs.

The original allegation stated that Yellowstone along with High Speed Capital LLC, World Global Capital LLC; Yes Funding, HFH Merchant Services LLC, Green Capital Funding LLC, MCA Recovery LLC, and MAX Recovery LLC, all of which we have defended small businesses against, acted to cheat financially-strapped small businesses and their owners out of millions of dollars. Primarily, this was done because of predatory lending practices that we have called out over the years due to the extremely high interest rates charged which exceed the state’s cap on usury laws. These transactions were disguised as cash advances on future receivables instead of extremely high interest loans. These companies then proceeded to collect and pursue businesses through what New Jersey called unconscionable, deceptive, and fraudulent servicing and collection. These practices drove most small businesses and their owners into default and financial ruin.

This is just another example of MCA companies in their regular course of business from our experience. We believe that more actions like this will come down from other states like New York where we think the tide is finally turning against MCA companies. More and more federal and state decisions are finding that these MCA agreements are usuriously high interest loans disguised as the purchase of business receivables. Yet, the predatory loans and especially the collection, litigation and enforcement against small business continues in an aggressive way. It is important for a small business to be able to defend themselves against MCA aggression in the meantime by retaining counsel focusing on these cases and the quickly evolving case law.