New York's Legal Battle Against Predatory Lending Practices
Unveiling the Struggle and Triumph of Small Businesses Against Predatory Lending
In Albany, New York, Attorney General Letitia James has accused a cash-advance company operating out of New York of exploiting vulnerable small businesses nationwide through the issuance of deceptive and predatory loans, with interest rates reaching up to 820%. The lawsuit was initiated on Tuesday against Yellowstone Capital and its network of associated entities and individuals, who are alleged to have continued its questionable practices under the guise of Delta Bridge following Yellowstone's supposed closure in 2021 amid various investigations.
According to the lawsuit, the group continued to extend what were essentially illegal loans, masquerading them as merchant cash advances. These are typically short-term loans with high interest rates intended for small businesses. An example provided involves City Bakery in Manhattan, which was paying over $2,000 daily, ultimately leading to its closure, as claimed by the Attorney General’s office.
James stated, "Under the guise of assistance, Yellowstone Capital, Delta Bridge, and their cohorts actually extended illegal loans with exorbitantly high interest rates." She emphasized the critical role of small businesses in the economy and the additional hardships imposed on them by such predatory lending practices. Attempts to contact Yellowstone and Delta Bridge for comments through phone and email were not immediately acknowledged, nor was a response received from Maury Rubin, the previous owner of City Bakery.
The lawsuit also highlights key figures from these companies who were involved in arranging and managing the unlawful loans, including David Glass, a co-founder of Yellowstone in 2019, who had earlier admitted guilt to insider trading charges. Attempts to reach Glass for a comment remained unanswered.
James is seeking a judicial order to prohibit the continued operation of Yellowstone, Delta Bridge, their affiliates, and certain officials, alongside advocating for a permanent industry prohibition for Glass. The aim is to secure a minimum of $1.4 billion in restitution for the adversely affected small businesses.
This legal action follows previous federal regulatory action against Yellowstone and its owners in 2020 for unauthorized withdrawals from client bank accounts. In 2021, Yellowstone consented to return over $9.7 million to the Federal Trade Commission, which was then redistributed to the victimized businesses. Additionally, in 2023, a settlement of roughly $27 million was reached with the state of New Jersey by the company and its affiliates over similar allegations. Prior to the New York lawsuit, settlements amounting to $3.37 million were achieved with five individuals connected to the Yellowstone scheme, benefitting the impacted businesses, as reported by James' office.
