Litigious lessor loses a big case FTC, class-action suits have targeted aggressive policies of office equipment lender By Sacha Pfeiffer, Globe Staff Boston.com But that's what happened when she leased equipment from Leasecomm Corp., a subsidiary of MicroFinancial Inc., a Woburn company that finances office products for small businesses. And she wasn't the first Leasecomm customer to find herself in this bind. Last month, a Massachusetts District Court judge ordered Leasecomm to pay Akpaffiong $187,225, ruling that it had deceived her in their business dealings. The amount includes triple damages because Leasecomm willfully violated state law with its ``unconscionable lease," ``false and misleading representations," and ``harsh and heavy-handed collection practices," the court said. The judgment is the latest legal blow for Leasecomm, whose restrictive leases and aggressive debt collection have made it the target of several class-action lawsuits, a federal racketeering complaint, securities fraud allegations, and civil charges by the Federal Trade Commission and an eight-state task force. An attorney for Leasecomm, Richard J. McCarthy, defends its leases as ``perfectly appropriate" and said the company will appeal the Akpaffiong ruling, which he called ``aberrational." Complaints about Leasecomm are similar nationwide, that it manipulated businesses and individuals into signing confusing, complicated leases for an array of business products and online services. Tens of thousands of those people were sued by Leasecomm after they stopped making payments because they had trouble canceling their leases or believed they had been overcharged. From 1985 to 2002, Leasecomm wrote nearly 700,000 leases and filed more than 92,000 lawsuits against people who failed to make payments, McCarthy said. Because its leases often required that disputes be resolved in Middlesex County -- no matter where the lease-signers lived -- Leasecomm won thousands of default judgments when defendants missed court dates in Massachusetts. Leasecomm's lawsuits have been difficult for customers to fight because the debts the company sought were often too small to make hiring a lawyer worthwhile, and because its small-business customers were not protected by some consumer protection laws, according to several attorneys who have represented clients sued by Leasecomm. But last month's ruling is ``very, very important" because it outlines a successful defense for people sued by Leasecomm for outstanding debts, said New York lawyer John C. Klotz , who in 2002 filed a federal civil racketeering lawsuit against the company that is pending. ``What we did differently is put the whole business practice in context and presented that to the court," said Derege B. Demissie , the Cambridge lawyer for Akpaffiong, who lives in Redondo Beach, Calif. ``It's difficult for an individual to win without showing the full picture."Continued... Attorney General Thomas F. Reilly , who helped broker a 2003 FTC civil settlement with Leasecomm, said at the time that the company ``knowingly participated in a scheme that used the `get-rich-quick' allure of selling products on the Internet to take advantage of thousands of consumers who were ultimately forced into debt." Leasecomm, which provides financing for products that cost between $500 and $10,000, often targeted immigrant communities and aggressively pursued outstanding debts through dunning letters and collection agencies, according to attorneys who have sued the company. ``Many people assumed at their peril that Leasecomm would work with them if they ran into problems or made their payments a little late," said Concord lawyer Kenneth D. Quat , who filed several class-action suits against the company, ``but Leasecomm was basically looking to squash everybody." The lease payments often totaled many times the fair market value of the products being financed. In Akpaffiong's case, the credit card machine she leased in 1999 for 24 monthly payments of $100 each could have been bought new for $700 or used for $300, she later learned. But Leasecomm told her the lease, which Judge Santo J. Ruma described in his ruling as ``confusing and beyond the scope of an ordinary person's understanding," could not be canceled. After Akpaffiong finished making payments, Leasecomm continued to assess monthly charges because, it said, she had not returned the equipment or notified the company by certified mail that she wanted to end the lease. Akpaffiong, who had thought she would be able to buy the machine at the end of the lease for $30 to $50, told her bank to stop Leasecomm's automatic deductions from her account. But Leasecomm continued the charges, adding collection fees and late payments. It eventually sued her for $3,029.35 in past-due charges and sent negative reports about her to credit agencies. Akpaffiong was unable to buy a van for her business because of her negative credit rating. ``They're really destroying the lives of people who don't have much money to start with," said Glenn Harrison of Montgomery, Ala., who said he signed up for a $64.95/month Leasecomm service that let him take online credit card payments and, after trying to cancel it, was billed $3,500. ``It's despicable." Leasecomm's chief executive, Richard F. Latour, did not return a call for comment. But McCarthy, Leasecomm's lawyer, said he ``strongly disagrees" with last month's ruling and described Leasecomm's contracts as ``typical finance leases." When customers have payment concerns or problems, Leasecomm is ``flexible and reasonable and practical," McCarthy said, ``and would rather work something out so that some amount of payment is coming in, as opposed to having to resort to litigation." The 2003 FTC settlement canceled $24 million in court judgments that Leasecomm had won by default when small-business defendants couldn't make court dates in Massachusetts. That amount covered between 6,000 and 8,000 leases, according to FTC attorney Randall H. Brook. But Demissie and other lawyers who have sued the company said prosecutors did not go far enough. ``They should have looked at a criminal indictment," said Dorchester lawyer Thomas J. Doherty . Jesse Caplan , chief of the consumer protection and antitrust division for the state attorney general , said the settlement has helped thousands of consumers. ``Are there people out there that may still be litigating with Leasecomm? We're sure there are, and some of them may be frustrated that they did not get immediate relief," Caplan said. ``But I think this is actually an example of a situation where we were able to get very broad relief for a very large number of people, and also change the practices of this company going forward." Sacha Pfeiffer can be reached at pfeiffer@globe.com . Leasing News previous articles on Leasecomm/Microfinancial:
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