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New Jersey Attorney General Matthew Platkin announced Jan. 3 that the state reached a $27.4 million settlement with Jersey City-based Yellowstone Capital LLC, its parent company Fundry LLC, and six other associated companies to resolve allegations of predatory lending and collection practices through their merchant cash advance (MCA) business.

The state had alleged that the companies targeted small businesses – often financially strapped – with “unconscionable, misleading, and abusive lending, servicing, and collection tactics” that included luring these enterprises into predatory lending arrangements disguised as cash advances on future receivables. Officials further alleged that the companies doubled down by enacting deceptive and fraudulent service and collection practices, driving 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 Platkin in a statement. “Through this settlement we stood up to these illegally-profiteering companies and brought critical financial relief to hard working New Jerseyans.”

Under the settlement, which resolves the original complaint filed by the state in December 2020, all New Jersey customers who entered into MCA agreements with these entities will have their outstanding balances forgiven — totaling nearly $21.75 million.

The remaining more than $5 million from the settlement will be paid to the Division of Consumer Affairs for restitution to certain Garden State customers, civil penalties, attorneys’ fees, and costs.

Additionally, under terms of a consent order entered by the Division of Consumer Affairs, the entities agreed to several conditions, including:

• Dismissing any pending debt collection actions against customers whose balances were forgiven as a result of this settlement
• Providing current customers with enhanced rights to request modifications to their payment terms based on actual receivables
• Improving internal business practices, being transparent in any terms of future MCA agreements regarding fees and reconciliation rights, and giving notice to customers before taking legal action to collect on purported unpaid balances
• Ensuring that the respondents, their principals and any future business entities resulting from their change in structure, adhere to the terms of the consent order

In a press release announcing the settlement, Cari Fais, acting director of the Division of Consumer Affairs, said that companies harming New Jerseyans with predatory lending schemes will be held accountable.

“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,” Fais added.

An attorney for Yellowstone Capital and associated entities did not immediately return a request for comment.