Cash Advance Firm to Pay $9.8M to Settle FTC Complaint It Overcharged Small Businesses

Cash Advance Firm to Pay $9.8M to Settle FTC Complaint It Overcharged Small Businesses Yellowstone Capital made unauthorized bank withdrawals and misled business owners, FTC alleged Yellowstone Capital, a provider of merchant cash advances, will pay more than $9.8 million to settle Federal Trade Commission charges that it took money from businesses' bank accounts without permission and deceived them about the amount of financing business owners would receive and other features of its financing products. Merchant cash advances are a form of financing in which a company provides money to a small business up front in exchange for a larger amount repaid through daily automatic payments. In this case, the FTC alleged that Yellowstone and its owners continued withdrawing money from businesses' bank accounts for days after their balance had been repaid. The complaint alleged that these unauthorized withdrawals left businesses without needed cash and that any refunds from the company could take weeks or months. The complaint also alleged that, in many cases, Yellowstone misled businesses about the amount of funding they would actually receive, and defendants' requirements that consumers pledge collateral and make personal guarantees. Under the terms of the settlement, Yellowstone, Fundry Inc., Yitzhak (Isaac) Stern, and Jeffrey Reece will be required to surrender $9,837,000 to the FTC to be used in providing refunds to affected businesses. In addition, the settlement permanently prohibits the defendants from misleading consumers about the terms of their financing, including the amount and timing of any fees and whether business owners are required to be personally liable for the financing. The defendants will also be prohibited from making withdrawals from consumers' bank accounts without their express informed consent. In connection with other claims they make to consumers, the defendants will be required to clearly and conspicuously disclose any fees that will be paid by consumers for the financing, as well as the actual amount of money that a consumer will receive after the fees are charged. They will also be required to monitor any marketers or funding companies that work on their behalf, to investigate complaints against them, and to terminate their relationship with any such company that fails to abide by the settlement's requirements. The Commission vote approving the stipulated final order was 4-0. The FTC filed the proposed order signed by the Commission and the defendants on April 21, 2021 in the U.S. District Court for the Southern District of New York. NOTE: Stipulated final orders have the force of law when approved and signed by the District Court judge. The Federal Trade Commission works to promote competition and to protect and educate consumers. You can learn more about consumer topics and report scams, fraud, and bad business practices online at ReportFraud.ftc.gov. Like the FTC on Facebook, follow us on Twitter, get consumer alerts, read our blogs, and subscribe to press releases for the latest FTC news and resources. Contact Information Contact For Consumers: FTC Consumer Response Center 877-382-4357 Media Contact: Jay Mayfield Office of Public Affairs 202-326-2656 Staff Contacts: Evan Zullow Bureau of Consumer Protection 202-326-2914 Christopher Leach Bureau of Consumer Protection 202-326-2394 Related Cases Yellowstone Capital LLC, FTC v. For Businesses Blog: FTC says Yellowstone wasn't faithful to claims it made to small businesses Staff Perspective Paper on FTC's Strictly Business Forum More news from the FTC >>    SUBSCRIBER SERVICES:  Manage Preferences  |  Unsubscribe  |  Help This is a free service provided by the Federal Trade Commission.

 

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