Yellowstone Capital $534M MCA Settlement: Full Breakdown

In November 2023, the New York Attorney General announced a $534 million settlement with Yellowstone Capital, one of the largest merchant cash advance providers in the country. It is the largest MCA enforcement action in United States history. Understanding what Yellowstone was accused of, what the settlement required, and what it signals about the broader MCA industry is essential context for any small business owner who has taken an advance or is considering one.

Who Is Yellowstone Capital?

Yellowstone Capital is a New York-based MCA company that has funded billions of dollars in advances to small businesses across the country since its founding in 2009. At its peak it was one of the most active MCA originators in the country, funding thousands of small businesses in industries including restaurants, retail, trucking, healthcare, and professional services.

The company is not a bank and is not subject to bank regulatory oversight. Like most MCA providers, it operates as a commercial finance company, which historically placed it outside the scope of consumer protection laws and state usury statutes, at least under the company's own interpretation of its business model.

What the New York AG Alleged

The New York Attorney General's investigation, which ran for several years before the settlement, alleged a systematic pattern of deceptive and illegal conduct. The core allegations included several distinct categories of misconduct.

On pricing and disclosure: the AG alleged that Yellowstone systematically misrepresented the true cost of its advances to borrowers. This included marketing materials and sales representations that described the factor rate cost in ways that obscured the effective annual cost, and in some cases outright misrepresented the total repayment obligation.

On reconciliation: the AG alleged that Yellowstone structured its contracts to include reconciliation provisions but then routinely refused to honor reconciliation requests from borrowers experiencing revenue declines. The effect was that what was presented as a flexible purchase of future receivables operated in practice as a fixed-payment obligation with no downside adjustment for the borrower.

On confession of judgment: the AG alleged that Yellowstone systematically used COJ clauses to obtain judgments against borrowers who disputed their contracts, fell behind on payments, or attempted to negotiate modified terms. This included using COJ filings against out-of-state borrowers in ways that New York's 2019 reform was specifically designed to prevent. For more on COJs, see our article on confession of judgment in MCA contracts.

On stacking: the AG alleged that Yellowstone encouraged and participated in advance stacking, funding second and third positions knowing that borrowers were already stretched thin by existing MCA obligations, and that this practice contributed systematically to business failures among its borrower population.

What the Settlement Required

The $534 million settlement included both restitution to harmed borrowers and prospective compliance requirements imposed on Yellowstone going forward.

On restitution: the settlement required Yellowstone to provide relief to borrowers who had been harmed by the alleged practices. The structure of the relief included debt forgiveness for certain borrowers with outstanding balances and direct payments to borrowers whose businesses had failed in connection with the conduct described in the complaint.

On compliance: Yellowstone was required to implement new disclosure practices including providing borrowers with the effective APR of advances before funding, to honor reconciliation requests consistent with the terms of its contracts, and to cease using COJ clauses against out-of-state borrowers in violation of the 2019 reform.

On monitoring: the settlement included provisions for ongoing compliance monitoring by the AG's office, with specific reporting requirements designed to ensure that Yellowstone's post-settlement practices actually conformed to the agreement.

What It Means for Other MCA Borrowers

The Yellowstone settlement is significant beyond the specific borrowers who received direct relief because of what it established as the standard for acceptable MCA industry conduct in New York.

The settlement definitively established that using COJ filings against out-of-state borrowers after the 2019 reform is illegal under New York law. Any MCA lender that continued this practice after 2019 and before your advance was funded may have engaged in conduct that New York regulators view as actionable.

The settlement established that promising reconciliation while systematically refusing to honor it is deceptive. If your contract has a reconciliation clause and your lender has ignored or denied your reconciliation requests without basis, that pattern mirrors what the AG successfully prosecuted against Yellowstone.

The settlement established that systematically obscuring the true cost of advances through misleading disclosure practices is actionable under New York consumer and business protection law. This has implications for any borrower who was materially misled about their repayment obligation.

What Other States Are Doing

New York was not alone in pursuing MCA enforcement. California's Department of Financial Protection and Innovation has been increasingly active in examining MCA provider conduct under SB 1235 and broader consumer protection authority. The California AG has separately examined MCA practices in connection with broader investigations of small business lending.

The Federal Trade Commission has authority over deceptive practices in commercial lending and has signaled increased attention to the MCA industry as part of its broader focus on small business financial products.

Illinois, New Jersey, and Connecticut have all seen state-level MCA enforcement actions or legislative activity targeting disclosure practices and collection conduct since 2022. The regulatory momentum that the Yellowstone settlement exemplifies is not limited to New York.

For the dangers of taking multiple advances at once, see MCA stacking.

Frequently Asked Questions

Was Yellowstone Capital shut down as a result of the settlement?

No. The settlement required compliance reforms and restitution but did not shut down Yellowstone Capital's operations. The company continues to operate under the terms of the settlement agreement.

Am I eligible for settlement relief if I had a Yellowstone advance?

Eligibility for direct relief under the settlement depends on the timing of your advance, the specific conduct you experienced, and whether your situation falls within the categories covered by the settlement agreement. Contact the New York Attorney General's office directly or consult with an MCA defense attorney to assess your specific situation.

Does the Yellowstone settlement help me if my MCA is with a different lender?

Not directly. But it establishes legal and regulatory standards that apply broadly to MCA conduct in New York and that other state AGs and regulatory bodies are watching. If your lender engaged in similar conduct including COJ abuse, reconciliation refusal, or deceptive cost disclosure, the Yellowstone framework gives attorneys and regulators a strong precedent to reference.

What should I do if I think my MCA lender is using the same tactics described in the Yellowstone case?

Document everything. Save your contract, all communications with your lender, your bank statements showing daily debits, and any reconciliation requests you made and the responses you received. Then consult with an MCA defense attorney who can assess your specific contract and conduct against the legal framework the Yellowstone case established.

This article is for educational purposes only and does not constitute legal or financial advice. Details of the Yellowstone Capital settlement are drawn from publicly available New York Attorney General filings and press releases. Consult a licensed attorney for advice specific to your situation.