Lease Source lsi / FRAUD
A.G. Schneiderman Sues Business Equipment Company For Ripping Off $3.5 Million From Former Customers
New York-Based SKS Associates And Northern Leasing Systems Drained Millions From Bank Accounts Nationwide Without Warning
Lawsuit Seeks Restitution For Tens Of Thousands Of Defrauded Former Customers
Schneiderman: We Will Fight To Ensure An Honest Marketplace; Deceptive Business Practices Will Not Be Tolerated
NEW YORK– Attorney General Eric T. Schneiderman today announced a lawsuit against a group of New York City-based business equipment leasing companies that fraudulently siphoned millions of dollars from their former customers, including mom-and-pop stores and other small businesses. Northern Leasing Systems, Inc. and its affiliates, which lease credit card processing machines and other equipment, carried out a deceptive scheme to drain over $10 million in unauthorized debits from the bank accounts of over 100, 000 former customers up to 11 years after their equipment leases had expired, ultimately retaining at least $3.5 million.
To disguise the scheme, Northern Leasing and its affiliates, Lease Finance Group LLC, MBF Leasing LLC, Golden Eagle Leasing LLC, and Lease Source-LSI, LLC, used a shell company, SKS Associates LLC, to deliberately mislead customers in an attempt to avoid any harm to Northern Leasing’s business reputation. Tens of thousands of former customers were shocked to discover automatic debits from their bank accounts, by a company they had never heard of.
“These companies engaged in a series of deceptions to squeeze unauthorized fees out of their former customers up to a decade after their contracts expired. We will seek both restitution for defrauded customers and substantial penalties from the companies to ensure justice and accountability prevail, ” Attorney General Schneiderman said. “My office will do everything in its power to ensure that New York’s marketplace is honest and fair. Deceptive business practices will not be tolerated.”
After receiving over 70 complaints from victims around the country, Attorney General Schneiderman’s office conducted an investigation into the SKS collection scheme. Northern Leasing and its affiliates lease credit card processing machines and other business equipment to small businesses. The customers’ bank accounts were charged automatically every month. The leases required customers to reimburse the companies for property taxes and related “administrative fees, ” but the leases were vague about the exact amount of “fees” and the timing of the payments. Northern Leasing claims it failed to collect some of these amounts from certain customers while their leases were still active. However, when pressed by the Attorney General’s office, the company could not explain why it failed to collect the amounts previously, nor could it show that the alleged amounts were actually owed. In fact, 77 percent of the amounts SKS sought to collect were not taxes at all but “administrative fees.”
When Northern Leasing decided to seize these amounts years after the leases expired, they set up a scheme to make it less likely that people would fight the charges. First they channeled all the collections through SKS, a shell company that none of the customers had ever done business with. SKS began withdrawing money from former customers before it was even legally registered to conduct business. Notice letters were sent out, but many of them were sent out the same day or only one day before the debits. When SKS was flooded with telephone calls from upset customers, they stopped sending notice letters altogether, taking money from former customers’ bank accounts with no notice at all. In many cases, SKS even debited former customers who had exercised buyout options to purchase the leased equipment and had received releases from any additional claims.
Even the former customers who did receive notice faced an additional web of misrepresentations. In its notice letter, SKS falsely claimed that “[a]n audit was conducted on [the customer’s] account, ” which had revealed that taxes and fees were still owed. However, SKS executives later admitted that no such audit had ever been performed. SKS also made false threats, telling customers they would be referred to collection agencies and credit bureaus if they tried to fight the charges, when they had no intention to follow through on those threats. When customers asked for proof that the charges were legitimate and accurate, SKS failed to provide any. And when some customers tried to verify the charges on their own, they discovered that the amounts were not accurate.
The Attorney General’s lawsuit seeks full restitution for the tens of thousands of former customers defrauded in the scheme, disgorgement of all profits, penalties, fees, and injunctive relief prohibiting Northern Leasing and its affiliates from continuing to engage in these deceptive collection practices.
Attorney General Schneiderman encourages victims or anyone with information about Northern Leasing and SKS’s scheme to file a complaint with the Consumer Frauds and Protection Bureau. The forms are available here. Victims may also call the Attorney General’s Consumer Frauds hotline at [protected].
The case is being handled by Assistant Attorneys General Laura J. Levine and Tristan C. Snell, under the supervision of Deputy Bureau Chief of the Bureau of Consumer Frauds and Protection Jeffrey K. Powell, Bureau Chief Jane M. Azia, and Executive Deputy Attorney General for Economic Justice Karla G. Sanchez.
Consumer Frauds and Protection Bureau