FUNDERSTAND
NY AG Letitia James at press conference announcing $1B Yellowstone Capital settlement. Michael M. Santiago / Getty Images
$1 Billion Settlement. 18,000+ Small Businesses. 820% APR. The MCA Industry's Worst-Kept Secret Just Got Exposed.
Ref: Newsweek | "Over 18,000 Americans to Have Debt Forgiven After Lawsuit Settlement" · Jan 23, 2025
McDONNELL HOPKINS
MCA Contract Defense · FUNDERSTAND.me Intelligence Desk
Let's be direct about what the Yellowstone Capital settlement actually represents, because the MCA industry's spin machine is already working overtime trying to frame this as an isolated incident. It is not. This is a $1 billion verdict against practices that are, frankly, standard operating procedure across the MCA space.
"Targeting small businesses with predatory loans and outrageous interest rates threatens the livelihoods of hardworking business owners and their employees."
— NY Attorney General Letitia James
New York's Attorney General found 25 lending companies under the Yellowstone umbrella were charging interest rates of up to 820% APR, more than 50 times the legal rate for loans in New York State. These weren't obscure edge cases. These were structured, deliberate contracts designed to disguise loans as "flexible revenue purchases" while locking merchants into fixed daily repayments regardless of actual business performance.
Total Judgment
Debt Relief Secured
Businesses Affected
What makes this case so significant for every merchant currently trapped in an MCA position is the specific mechanism the AG's office identified: the use of "deceptive contracts to disguise merchant cash advances as flexible revenue purchases." In plain terms, the funder called it a purchase of future receivables on paper while structuring it to function exactly like a fixed-term, high-interest loan. That distinction is precisely the legal battleground where MCA contracts can be challenged and overturned.
The LG Capital 3-Prong test, built directly into our platform, is the exact legal framework used to determine whether an MCA should be reclassified as a usurious loan. If your contract has fixed repayment periods, no genuine reconciliation mechanism, and includes personal guarantees, your funder may have just handed you the roadmap to challenge it entirely.
The settlement outcome is also instructive: the companies must cease all collection activity, vacate court judgments, terminate UCC liens, and are permanently banned from the MCA industry. That is the complete arsenal that MCA funders routinely weaponize against merchants: collections, judgments, and UCC liens, all neutralized in a single order.
We've said it before and the record now proves it: the MCA industry is not a niche gray area. It is a documented, enforcement-level problem affecting tens of thousands of American businesses. The Yellowstone settlement is the largest consumer settlement ever achieved by the New York OAG for a reason: the harm was that large, that systematic, and that provable.
If you're currently in MCA positions with daily or weekly ACH withdrawals, UCC liens on your receivables, or default notices piling up, the question isn't whether what's happening to you is predatory. The question is whether you've had a forensic review done to quantify exactly how much leverage you actually have.