Home Jersey finance news FTC Settles Claims Alleged Merchant Cash Advance Providers Engage in Unfair and...

FTC Settles Claims Alleged Merchant Cash Advance Providers Engage in Unfair and Deceptive Practices Ballard Spahr srl


The Federal Trade Commission recently announced that it had settled the lawsuit he filed against Yellowstone Capital LLC, a provider of cash advances to merchants, and its managing director and president for alleged unfair and deceptive conduct in violation of Section 5 of the FTC Act, 15 USC § 45.

In its complaint, the FTC alleged that the defendants engaged in deceptive acts or practices by (1) stating that they did not need collateral or personal guarantees from business owners while ” in effect, they required business owners to give a purported security or lien on all business property they owned, and (2) indicating that the defendants would provide business owners with a certain amount of financing when in reality the amount provided was considerably less due to the withholding of charges which were not clearly and conspicuously disclosed. The FTC also alleged that the defendants engaged in unfair acts or practices by taking money from companies’ bank accounts without authorization.

The settlement requires defendants to pay the FTC $ 9,837,000 to be used to reimburse affected businesses. In addition, defendants are permanently prohibited from making false statements about (1) the conditions for obtaining the product or service financing; (2) the fees or charges and the total amount that customers will reimburse; (3) the amount of funds that will be received; (4) and any other material fact related to the fundraising product or service.

Defendants are further required to clearly and visibly disclose all fees and charges, the amount of charges will reduce funds received, the specific amount of funds the client will receive after paying the fees and charges, and the total amount that the customer will refund. The regulations also prohibit defendants from making unauthorized withdrawals from any consumer’s financial account.

The proposed order also contains various compliance monitoring provisions, including a requirement for defendants to create and maintain a system to monitor merchants and funders for compliance with the terms of the settlement if they choose to work with such entities.

The settlement was filed with the United States District Court for the Southern District of New York just one day before the United States Supreme Court ruling in AMG Capital Management, LLC v. FTC, in which the Court ruled that Section 13 (b) of the FTC Act does not authorize the FTC to seek, and a court to grant, pecuniary relief such as restitution or restitution.

In response to the Supreme Court ruling, the FTC filed a Notice of additional authorization informing the district court of the decision and stating its position that the decision does not affect the authority of the district court to make the stipulated order because it is a contract between the consenting parties.

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