FTC Sending $9.7M to Yellowstone Capital Victims

The U.S. Federal Trade Commission announced Tuesday (June 21) that it is sending 7,731 checks totaling more than $9.7 million to small businesses hurt by Yellowstone Capital, a merchant cash advance company the government said withdrew money from customers’ accounts without permission.

Business deemed eligible for payments will receive 51% of the funds they lost — an average of $1,200 per check — the agency stated in its announcement.

In 2020, the FTC sued Yellowstone and its owners, alleging they violated the law by taking millions of dollars from customers’ accounts without justification.

Merchant cash advance companies in many instances provide businesses with what effectively are loans against future revenue in return for the right to withdraw money from business bank accounts without specific permission each time. The FTC alleged that some companies took money from the accounts of businesses with which they worked even when those businesses owed no funds.

In some instances, the government alleged, Yellowstone took hundreds of thousands of dollars it was not owed from businesses and only gave refunds when the businesses’ representatives complained.

“And even then the refunds could take weeks or months, leaving small businesses without needed cash on hand,” the FTC said in its release.

The government’s action against Yellowstone was part of a broader move against a number of merchant cash-advance companies.

Read more: Prosecutors Target Loosely-Regulated Business Lending Sector

In 2021, Yellowstone consented to a court order that required it surrender the funds the FTC is using to issue the checks to victims.

The FTC announcement also stated that the U.S. Supreme Court in 2020 ruled that the FTC could not seek monetary relief for victims of misconduct in federal court going forward. The agency has asked Congress to restore the authority through legislation.