2026 Top Business Debt Settlement Companies New York City

The Yellowstone Settlement and What It Exposed

One does not settle a debt by asking for mercy. One settles a debt by demonstrating, with precision, that the creditor's position contains defects the creditor would prefer not to litigate. In New York, those defects are numerous. They are structural. And for businesses carrying merchant cash advance obligations or commercial debt originated by nonbank lenders, the defects are, in many cases, fatal to the creditor's claim.

In January 2025, the New York Attorney General announced a settlement with Yellowstone Capital and its network of affiliated entities. The judgment exceeded one billion dollars. Over five hundred million in outstanding merchant debt was cancelled. The remaining balance, which the settling defendants remain liable for, sits in the hundreds of millions. The settlement barred Yellowstone from the MCA industry entirely.

The significance of Yellowstone was not its size, though the size was considerable. The significance was the theory. The Attorney General's office argued, and the settlement confirmed, that merchant cash advances structured as purchases of future receivables were, in substance, loans. The reconciliation provisions that would have distinguished an MCA from a loan (the requirement that a funder adjust daily payments when the merchant's revenue declines) existed in the contract language. They had not been honored in practice.

Justice Borrok, in related proceedings involving Richmond Capital Group, observed that MCA funders invoking their reconciliation clauses tended to either concede that reconciliation never occurred or invoke the Fifth Amendment. The word the courts have settled on is “illusory.” The provision appears in the agreement. The mechanism does not function. When the contractual feature that separates a purchase of receivables from a loan is illusory, the transaction is a loan. When the effective annual percentage rate on that loan exceeds twenty five percent, the transaction violates Penal Law Section 190.40, New York's criminal usury statute. The agreement is not merely voidable. It is void.

That distinction matters for settlement. A creditor pursuing collection on a void agreement occupies a position of remarkable weakness, though the creditor will not volunteer this information. The business owner who understands the distinction holds a negotiating advantage that did not exist, or did not exist in enforceable form, before the Yellowstone line of cases crystallized the theory.

The Attorney General's office had previously secured a judgment of more than seventy seven million dollars against Richmond Capital Group and its principal in early 2024. Lawsuits against Yellowstone successor organizations and individuals continue. The enforcement posture has moved beyond aspiration. It is ongoing, and it is expanding.

What this means for a business owner carrying MCA debt in New York is something that the standard settlement advice does not capture. The question is not merely “how much can I negotiate off the balance.” The question is whether the underlying agreement survives scrutiny at all. If the funder failed to honor the reconciliation mechanism, if the effective APR breaches the criminal threshold, the entire contract may be void under General Obligations Law Section 5-511. A confession of judgment entered on a void obligation possesses no legal force. The settlement calculation changes when the creditor is defending the enforceability of the instrument itself.

I am less certain about how broadly courts will apply this reasoning outside the MCA context, and outside the specific factual patterns that Yellowstone and Richmond Capital presented. But the trajectory is clear enough that a business owner entering settlement discussions should, at a minimum, have counsel evaluate whether the transaction at issue is susceptible to recharacterization.

New York's Usury Framework

The architecture of New York's usury law operates on two tiers. General Obligations Law Section 5-501 establishes a civil usury cap. Penal Law Section 190.40 establishes a criminal threshold at twenty five percent. The civil cap carries consequences; the criminal threshold carries different ones.

An agreement that exceeds the criminal usury rate is void under GOL 5-511. Not voidable at the election of the borrower. Void. The distinction is not academic. A voidable contract exists until someone challenges it; a void contract, by contrast, is treated by the law as though it were never formed. The funder cannot collect principal. The funder cannot enforce associated security instruments. The confession of judgment, the UCC lien, the personal guarantee: all of them rest on a foundation that the law treats as if it were never constructed.

GOL 5-521 contains a corporate defense exclusion that historically insulated transactions involving corporate borrowers from usury challenges. The interplay between this exclusion and the recharacterization doctrine remains unsettled in several respects. Courts have reached different conclusions depending on the entity structure, the nature of the personal guarantee, and whether the claim arises in the criminal or civil usury context. The statute is not entirely clear on this point, which is part of the problem, and which is also part of the reason that settlement discussions in this area require counsel who can assess the specific facts of the transaction.

For the business owner, the practical consequence is this: the APR on a merchant cash advance, when the advance is recharacterized as a loan and the actual payment history is examined, tends to exceed the criminal threshold by a wide margin. The funder knows this. The business owner, in most cases, does not. The settlement discussion proceeds on asymmetric information until someone corrects it.

Confession of Judgment Defenses

CPLR Section 3218 governs the confession of judgment in New York. The 2019 amendment prohibited the filing of confessions of judgment against out of state borrowers, a reform that eliminated what had been the most common abuse: a funder in Manhattan filing a confession against a business owner in another state who had no idea the proceeding had occurred. For New York based businesses, confessions of judgment remain available. Senate Bill S2305, introduced in the 2025 legislative session, proposed extending protections to individuals and to transactions below certain thresholds. The bill has not passed.

The confession of judgment is a signed document, included in the origination package, that authorizes a court clerk to enter a judgment against the signer without notice or hearing. The merchant learns of the judgment when the bank account freezes. The mechanism functions, and has functioned since at least 2012 in the MCA context, as an instrument of velocity: the funder converts a contractual default into a court judgment in days rather than months.

The statute imposes formal requirements. The affidavit must be executed with a notarized signature. It must identify the signor's residence. In Porges v. Kleinman, decided in January 2024, a Kings County court held a confession unenforceable because the affidavit failed to identify the signor's residence as the statute requires. The defect was formal. The consequence was total. In Capitalize Group LLC v. Empire Core Group LLC, decided in September 2025, a Westchester County court established that vacatur of a confession requires a plenary action rather than a motion, a procedural holding that imposes cost on the merchant but also confers the full evidentiary machinery of litigation.

These are not theoretical defenses. MCA agreements are produced in volume from templates. The origination process is fast. Documents are generated with insufficient attention to the statutory requirements that make the confession enforceable. A confession that fails to comply with CPLR 3218 can be vacated, and the judgment that followed from it dissolved, which repositions the merchant from debtor to defendant with standing to contest the underlying obligation.

The window for challenging a confession of judgment is not indefinite. The longer a judgment remains unchallenged, the stronger the creditor's position becomes. A business owner who discovers a judgment against them should treat the matter as requiring immediate legal attention, measured in days.

Disclosure Failures Under the CFDL

New York's Commercial Finance Disclosure Law, codified at Article 8 of the Financial Services Law, requires providers of commercial financing in amounts up to two and a half million dollars to deliver standardized disclosures at the time a financing offer is extended. The disclosure requirements became mandatory in August 2023. They apply to merchant cash advances, closed end financing, open end financing, and factoring transactions. Banks and their majority owned subsidiaries are exempt.

The CFDL requires disclosure of the amount financed, the annual percentage rate, the finance charge, and the total repayment amount, among other terms. It requires that these figures be presented in a standardized format, and that any rate quoted during the application process be stated as an APR. The Department of Financial Services retains the authority to impose civil penalties for violations.

The relevance to settlement is practical rather than dramatic. A funder that failed to provide CFDL compliant disclosures at origination has a compliance problem that a skilled negotiator can identify and raise. The exposure does not void the agreement the way a usury violation does. But it introduces a deficiency into the creditor's position, one that the creditor must weigh against the cost of a dispute. Most MCA funders operating in 2023 and 2024 were still adjusting to the CFDL's requirements. The degree of compliance varied. Some funders achieved full compliance. Others, if we are being precise, did not comply at all.

In settlement, the question one poses is whether the creditor's position is clean. The CFDL is one of several instruments for determining the answer, and among the less dramatic ones, though creditors tend to overlook it for exactly that reason.

What September Changes

On February 26, 2026, the New York City Department of Consumer and Worker Protection published the SHIELD Rule: the Stopping Harassment and Intimidation and Ensuring Lawful Debt Collection Rule. The rule takes effect September 1, 2026. It is, by the city's own characterization, the strongest set of municipal debt collection protections in the country.

The SHIELD Rule imposes a hard cap on collection contacts: three attempts within any seven day period. The cap covers telephone calls, emails, and text messages. Federal Regulation F does not impose an equivalent ceiling. The prior DCWP rules prohibited harassment but contained no quantitative limit. The shift from a general anti harassment standard to a fixed numerical restriction eliminates the ambiguity that collectors had, in practice, used to their advantage.

The rule expands dispute rights beyond what federal law provides. Under the Fair Debt Collection Practices Act and Regulation F, a consumer may dispute a debt in writing within thirty days of receiving a validation notice, and the dispute triggers certain protections. Under the SHIELD Rule, a consumer may dispute a debt at any point during the collection process, using any communication channel the collector has used. Upon a first dispute, the collector must cease collection and provide documentary verification within sixty days. A default judgment alone does not constitute sufficient verification.

That last provision is worth pausing on. A default judgment, by itself, is not enough.

The SHIELD Rule extends coverage to original creditors, not only third party collectors and debt buyers. When a hospital, a financial institution, or any other creditor initiates debt collection procedures (defined as ceasing periodic statements, accelerating the total balance, or threatening legal action), that creditor becomes subject to the rule. The rule also introduces protections specific to medical debt, including a prohibition on reporting medical debt to credit bureaus.

The business debt settlement practitioner should understand the SHIELD Rule not as a shield (the name invites the metaphor, and I will resist it) but as a source of procedural requirements that collectors must satisfy. A collector who violates the contact caps, who fails to verify within sixty days, or who pursues collection on a debt that has been disputed and not verified, has committed a violation that alters the dynamics of any settlement negotiation. The rule provides no private right of action; the DCWP declined to adopt one, concluding it lacked the authority. But regulatory exposure to the DCWP itself, which has signaled an enforcement posture under Commissioner Sam Levine that is not passive, introduces a variable that a collector must account for.

Whether the SHIELD Rule will be enforced with the vigor its language suggests is a question I cannot answer from this desk. The rule is new. The effective date has not arrived. What one can say is that the structure is in place, and that the structure favors the debtor in ways that the prior regulatory framework did not.

Timing and Procedural Requirements

Settlement of business debt in New York City follows a pattern that varies less than one would expect across creditor types. The creditor holds a claim. The claim may be supported by a judgment, a lien, or merely by the terms of the agreement. The debtor, through counsel, evaluates the claim for defects: usury, disclosure failures, procedural noncompliance in the confession of judgment, violations of collection rules. The defects, if they exist, become the basis for the settlement position.

The first step is a review of the origination documents: the agreement, the confession of judgment, the personal guarantee, any UCC filings, and any disclosures provided under the CFDL. The second step, which most guides treat as optional and which is not, is an analysis of the funder's actual servicing history. Did the funder honor the reconciliation provision? Did daily payments adjust when revenue declined? The answers determine whether the transaction is an MCA or a loan, and whether the loan is void.

The third step is communication with the creditor or creditor's counsel, conducted in a register that makes the debtor's legal position clear without initiating litigation. One communicates the defects. One proposes a resolution. The resolution may involve a reduction of the balance, the vacatur of any judgment, and the termination of UCC liens. How much the creditor concedes depends on the creditor's own assessment of its litigation risk.

The process requires an attorney. Not a debt settlement company that works with a network of attorneys. Not a financial advisor. An attorney who can evaluate the specific transaction, identify the applicable defenses, and communicate with the creditor's counsel in terms that signal competence and preparation. The difference between a settlement conducted with legal counsel and one conducted without it is, in something like three quarters of the cases we have seen, the difference between a resolution that reflects the law and an installment plan that benefits no one but the creditor.

A consultation is where this work begins. It costs nothing and assumes nothing; it is the first step in determining whether the debt a business owner carries is what the creditor claims it to be, or something the law regards differently.

The Distance Between the Balance and the Obligation

New York City has constructed, through statute, regulation, and enforcement action, a legal environment in which business creditors (particularly nonbank lenders and MCA funders) operate under constraints they did not face five years ago. The CFDL requires transparency at origination. The usury framework provides a mechanism for voiding predatory agreements entirely. The SHIELD Rule, when it takes effect, will impose procedural requirements on collection that go beyond anything the federal government currently mandates. The Attorney General's office has demonstrated, through the Yellowstone settlement and the Richmond Capital judgment, that enforcement is not aspirational.

None of this eliminates the debt. None of this prevents a creditor from pursuing collection. What it does is alter the calculus. The balance on the statement is a number. The legal obligation is a different number, sometimes substantially different, and the distance between them is where settlement occurs.

Most business owners in the city do not call until the bank account has frozen. This is understandable. By then, the options have narrowed, though they have not disappeared. The earlier one examines the legal position, the wider the range of outcomes, and the greater the likelihood that the resolution reflects what the law permits rather than what the creditor demands.