Consumer Finance Insights
April 15, 2016

New York Attorney General Files Lawsuit Against Credit Card Transaction Processor

On April 13, 2016, the New York Attorney General announced the filing of a lawsuit against several affiliated companies and individuals who lease credit card transaction processing equipment to small business owners. The Attorney General alleges that the companies engaged in fraudulent and deceptive practices by inducing individuals into signing lease agreements without realizing it, falsely representing the equipment was free or would save the consumer money, and falsely stating the lease could be cancelled at any time. It is further alleged that many customers did not actually sign the lease agreements or material terms would be added after signing a lease agreement.

The Attorney General alleged that once customers stopped making payments, employees from the companies and an affiliated law firm would continuously call customers and threaten to sue them. It is claimed that the companies and the law firm abused judicial process by initiating approximately 30,000 collection actions in New York, knowing that the debts were uncollectable and that customers who lived far away from New York would not travel to defend the suits. It is claimed that many customers did not even know they had been sued. This resulted in the companies obtaining approximately 19,000 default judgments since 2010.

The lawsuit seeks to vacate default judgments obtained by the company, have the companies remove these lawsuits from consumers’ credit reports, pay restitution to consumers and to permanently enjoin the companies from engaging in unfair business practices. The Attorney General has already obtained a temporary restraining order preventing the companies from selling, assigning, or transferring any asset for less than fair market value. The companies must also provide a list of all assets to the Attorney General. This is actually the second action the Attorney General brought against the companies, having previously settled a similar lawsuit in 2013.

As previously reported by the Consumer Finance Enforcement Watch, the Tennessee Attorney General recently settled a case against another credit card transaction processor based on similar allegations. We will continue to keep readers apprised of such actions.

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