N.J. Says Cash-Advance Pioneeer Deceived Borrowers
(Bloomberg) -- New Jersey sued Yellowstone Capital LLC, a pioneer in a form of unregulated lending known as merchant cash advance, accusing the firm of deceiving small businesses and offering loans on predatory terms.
Attorney General Gurbir Grewal filed the suit on Tuesday in state Superior Court in Hudson County. Jersey City, New Jersey-based Yellowstone, whose business practices were the subject of a Bloomberg News series in 2018, faces similar allegations in a lawsuit brought by the Federal Trade Commission in August.
In a 55-page complaint, the attorney general says Yellowstone misled unsophisticated small-business owners into borrowing money under onerous terms, surprised them with hidden fees, failed to uphold its end of agreements and abused so-called confessions of judgment that borrowers were frequently required to sign.
“Defendants’ misconduct has led to the financial ruin of small businesses and owners across the United States,” the attorney general said in the complaint.
Lawyers who have represented Yellowstone and its officers in the FTC case didn’t respond to requests for comment. A message left at Yellowstone’s offices was not answered.
Yellowstone relocated from New York in 2016, after a New Jersey economic-development program approved as much as $3.3 million in tax incentives for the company over 10 years. At the time, Yellowstone said it planned to house 45 employees and 130 or more independent contractors in its new location. The state’s Economic Development Authority terminated the tax credit agreement last year because Yellowstone failed to meet its promised capital commitment, according to Virginia Pellerin, a spokeswoman.
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