NEW YORK (Reuters) - New York Attorney General Letitia James said on Wednesday her office obtained a $1.065 billion judgment against Yellowstone Capital, a cash advance provider accused of predatory lending, as part of a settlement that gives small businesses more than a half-billion dollars of debt relief.

James sued Yellowstone, now known as Delta Bridge Funding or Cloudfund, last March, saying its network of companies falsely told merchants it would buy specified percentages of future revenue, known as receivables, and that they could obtain refunds on loan payments if business slowed.

The attorney general said Yellowstone instead debited fixed sums from merchants' bank accounts, typically over 60 or 90 business days, resulting in "unconscionable" effective interest rates that often reached triple digits, reaching as high as 820%.

Rates above 16% are considered usurious in New York.

The settlement includes cancelling $534.5 million of debt owed by more than 18,000 small businesses nationwide, including some $36 million owed by more than 1,100 small businesses in New York, and $16.1 million paid by Yellowstone and its officers.

Yellowstone is liable for $514.3 million still outstanding. It isn't immediately clear how that sum would be collected.

The attorney general's lawsuit against Delta Bridge Funding, Cloudfund and Yellowstone co-founder David Glass is continuing.

"Yellowstone and its executives lined their pockets at the expense of vulnerable small businesses who turned to them for help," James said in a statement. "Their predatory loans forced successful companies to close and put New Yorkers out of work."

Eric Kanefsky, a lawyer for Yellowstone, said his client was pleased to settle. Lawyers for Delta, Cloudfund and Glass did not immediately respond to requests for comment. James' office did not immediately respond to a separate request for comment.

In December 2023, Yellowstone agreed to pay $5.6 million and forgive $21.8 million of debt to resolve claims by New Jersey's attorney general that it deceived businesses.