Yellowstone Capital LLC

The FTC alleged that Yellowstone kept withdrawing money from small businesses accounts for days after they had fully repaid, and promised no collateral or personal guaranty when its contracts required both. It surrendered $9.8 million.

Resolved. Refunded, settled, ceased operating, or the claim did not hold up. Kept for the record.

Taking payments after the debt was paid

A merchant cash advance provides a small business money up front in exchange for a larger amount repaid through daily automatic withdrawals. The mechanism depends entirely on the funder stopping when the balance is met.

According to the FTC’s complaint, Yellowstone regularly kept withdrawing hundreds or thousands of dollars from businesses’ accounts for days after they had repaid the full amount owed. Refunds sometimes came only when a business complained, and then could take weeks or months, leaving businesses without cash they needed. Some were left with bank overdraft fees caused by the unauthorized withdrawals.

The other two problems

For years the company allegedly misled customers about how much money they would actually receive. The amount on the contract did not reflect fees that would be deducted, totalling hundreds or thousands of dollars and in some cases not revealed until after signing. One business owner told the defendants: “you guys are like highway robbery.”

Its marketing promised that owners would not have to provide collateral or a personal guaranty. In many instances the contracts required the owner to be personally liable if the business failed to repay, and put the business and all its property up as collateral.

The order

Yellowstone, Fundry, Yitzhak Stern and Jeffrey Reece surrender $9,837,000 for refunds. They are permanently barred from misleading customers about financing terms, including fees and personal liability, and from withdrawing from accounts without express informed consent. They must disclose all fees and the actual amount a customer will receive after fees, and must monitor marketers and funding companies working on their behalf, investigate complaints against them, and terminate any that break the order.

In June 2022 the FTC sent 7,731 checks totaling more than $9.7 million, returning 51 percent of what each business lost, averaging more than $1,200.

What is not established

A stipulated final order resolves the allegations without any admission or finding of wrongdoing.

Sources

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Identity