Wednesday, June 6 , 2007
As being followed since the inception of the filing of the bankruptcy of NorVergence in July, 2004, and the multiply complaints, the Federal Trade Commission has filed against IFC Credit Corporation, Morton Grove, Illinois. The suite FTC v. IFC Credit Corporation, Civ. No. 07 C 3155 was filed this morning with Judge Joan B. Gottschall; Magistrate Judge Jeffrey Cole in the U.S. District Court for the Northern District of Illinois.
Randy Brook, FTC Senior Attorney
FTC Senior Attorney Randy Brook, out of Seattle, Washington, who also was the senior attorney in the MicroFinancial suit, has been working on this case from the inception. He is an expert on equipment leasing, in addition having the ability to read lease accounting and understanding many of the various equipment leasing accounting software.
The suit regards $21 million in leases. Leasing News has estimated IFC Credit has paid more than $21.5 million to date in attorney and court fees, with over 500 leases still in litigation. This definitely will cost IFC Credit Corporation over $50 million, should the FTC prevail, not counting the $13 million it borrowed from its lenders.
Will the firm survive the FTC filing is the question today?
The great majority of the funders of NorVergence leases have settled with 28 US Attorneys generals offices and the District of Columbia, and only a small handful remain active seeking litigation. The largest is IFC Credit Corporation.
The FTC is seeking full refund to the NorVergence lessees. This definitely will influence the pending cases and case on appeal by IFC Credit Corporation, and others, such as Sterling Bank, New York. In addition it will add to IFC Credit attorney and court costs.
In other breaking news, the State of Texas has filed against IFC Credit, Morton Grove, Illinois. The states may be able to charge penalties and fines as what occurred in the MicroFinancial case. There are also cases on appeal in Texas that will be affected by the suit. (The press release follows the FTC press release)
Leasing News has asked IFC Credit Corporation for a comment. In the past they have replied they do not comment on cases in litigation.
#### Press Release ##############################
FTC Charges Company with Financing Fraudulent Telecom Services Scheme
Deceptive NorVergence Rental Contracts Misled Consumers In the wake of the NorVergence Inc. telecommunications fraud case won by the Federal Trade Commission in 2005, the agency has charged a company with violating federal law by helping to finance the scheme and continuing to seek payment from defrauded consumers.
Based on an FTC complaint filed in 2004, a federal court voided 1,600 NorVergence contracts with small businesses and religious and other nonprofit organizations that were misled by promised savings on phone and Internet services. The contracts purported to be long-term rental agreements for a relatively inexpensive device that NorVergence falsely claimed would create the savings. NorVergence was forced into bankruptcy, and the promised services stopped.
The judgment the FTC obtained against NorVergence left unaffected thousands of rental agreements NorVergence had already sold to finance companies.
According to a complaint filed today by the FTC, IFC Credit Corporation purchased NorVergence rental agreements valued at $21 million, with individual contracts ranging from $4,439 to $160,672. Despite making payments, the complaint alleges, no customers received telecommunications services from NorVergence for more than a short period of time, and many consumers received none.
As stated in the complaint, IFC continued to finance the fraudulent scheme by accepting new rental contracts, despite NorVergence's failure to provide the promised services and the resulting high rate of default among IFC customers. Long after NorVergence entered bankruptcy in 2004, the complaint states, IFC continues to tell consumers they are obligated under the rental agreements because the payments are for the device, not for services.
Under the FTC Act, which prohibits unfair or deceptive business practices, the FTC charges IFC with misrepresenting that consumers have no defenses to payment on the NorVergence rental agreements; harming consumers by unfairly accepting and collecting on the rental agreements; and unfairly filing debt collection lawsuits in courts far from consumers' locations.
The Commission vote authorizing the staff to file the complaint was 5-0. The complaint was filed in the U.S. District Court for the Northern District of Illinois. The FTC is asking the court to order all rental agreements terminated and is seeking refunds for payments consumers made for services they never received. The FTC also is seeking a preliminary injunction to stop IFC from continuing any debt collection while the suit proceeds.
The FTC acknowledges the valuable assistance of the Attorneys General of Illinois, Massachusetts, California, Florida, Maryland, Missouri, Pennsylvania, Texas, and Connecticut.
NOTE: The Commission files a complaint when it has “reason to believe” that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law.
The case will be decided by the court.
Copies of the complaint are available from the FTC's Web site at http://www.ftc.gov and the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC works for the consumer to prevent fraudulent, deceptive, and unfair business practices in the marketplace and to provide information to help consumers spot, stop, and avoid them.
To file a complaint in English or Spanish or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877- 382-4357), or use the complaint form at http://www.ftc.gov/ftc/complaint.shtm.
The FTC enters Internet, telemarketing, identity theft, and other fraud-related complaints into Consumer Sentinel, a secure, online database available to more than 1,600 civil and criminal law enforcement agencies in the U.S. and abroad.
#### Press Release ########################
Attorney General Abbott Seeks Relief for Businesses Plagued by Debt Collector IFC Credit Corp. attempted to collect debts incurred under false pretenses
HOUSTON – Texas Attorney General Greg Abbott today asked a Harris County District Court to prevent IFC Credit Corp., an Illinois finance company, from attempting to recover fraudulently incurred debts from Texas small businesses and nonprofits for telecommunications services. According to court documents filed by the Attorney General and the U.S. Federal Trade Commission, IFC attempted to collect on debts it purchased from NorVergence Inc., a now-bankrupt company that defrauded small business owners.
NorVergence marketed fixed-price, low-cost telecommunications services to business owners. However, NorVergence customers did not realize they were actually signing five-year “rental agreements” for equipment that was essentially useless without the promised services. Since purchasing these accounts, IFC has aggressively attempted to collect debts that it knew resulted from contracts designed to deceive business owners.
Attorney General Greg Abbott
“Small businesses are critical to the success of Texas' economy,” said Attorney General Abbott. “The Office of Attorney General is committed to protecting small business owners from fraudulent schemes and unlawful debt collection practices. Texans can rest assured we will aggressively protect NorVergence victims from continued suffering because of this illegal, fraudulent scheme.”
Prior to its bankruptcy, NorVergence sold $21 million worth of accounts to IFC at a discount. NorVergence used the proceeds from the sale to pay for additional worthless products that it marketed to small businesses. Today's action accuses IFC of failing to exercise caution before acquiring the indebted customers' accounts, and of knowing NorVergence customers were tricked into the transaction with the false promise of low-cost services.
In 2004 the Attorney General took legal action against NorVergence for misleading hundreds of small businesses into signing five-year rental agreements for what amounted to worthless equipment and service. NorVergence falsely claimed it would drastically reduce telecommunications costs with its services. The rental agreements ranged in value from $4,400 to almost $161,000.
The Attorney General's petition against IFC seeks the dissolution of debts incurred by fraudulent means and the cancellation of wrongful contracts. Attorney General Abbott has also asked the court to void lawsuits IFC has filed against debtors since 2004, given that the company misled business owners into thinking they had no defenses in debt collection cases and that the debts were enforceable.
#### Press Release #############################
FTC'S MEMORANDUM IN
FTC'S MOTION FOR PRELIMINARY INJUCTION
COMPLAINT FOR INJUNCTIVE
ORDER FOR PRELIMINARY INJUNCTION
EXHIBITS SUPPORTING PLAINTIFFS MOTION
Texas Attorney General filing:
Litigation cost story:
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