Published: 11-07-08
Agreement with 18 states District of Columbia FTC resolves enforcement action against company
HOUSTON – Texas Attorney General Greg Abbott today filed an agreement with Illinois-based IFC Credit Corp. that protects small business owners who were deceived in a long-term finance scheme devised by a now-defunct company.
According to the state’s enforcement action IFC Credit purchased customer accounts from NorVergence Inc. a now-bankrupt company that sold worthless telecommunications services to small businesses.
Under today’s agreement IFC Credit will release Texas small business debtors from most of the financial obligations they incurred after buying NorVergence’s products. In 2007 the Attorney General charged IFC Credit with unlawfully attempting to collect monies from small business owners in several states asserting that the business owners signed NorVergence service contracts that were deceptive.
Under a 2004 contract IFC Credit purchased $21 million in uncollected telecommunications business accounts from NorVergence at a steep discount. According to documents filed by the state IFC Credit should have known that the NorVergence business customers had been deceived into financing worthless telecommunications equipment.
The customers subsequently were induced to enter into deceptive “rental agreements” which placed them into a five-year revolving debt cycle. The rental agreements that were owed by customers ranged from $4000 to $160000.
Because these transactions were based on a deliberate scheme to defraud NorVergence customers the state maintained that IFC Credit was not entitled to collect monies from these customers after July 2004 when NorVergence declared bankruptcy. IFC Credit continues to deny it had any knowledge of NorVergence’s fraudulent activities.
Under today’s settlement customers are still obligated to satisfy debts incurred before July 15 2004. IFC Credit will forgive approximately 84 percent of the remaining post-July 15 contract balances as well as 100 percent of late fees incurred by delinquent debtors.
The Office of the Attorney General joined this settlement with 17 other state attorneys general the District of Columbia and the Federal Trade Commission.
The state initially filed an enforcement action against NorVergence in November 2004 when it was charged with misleading hundreds of small businesses promising that its telecommunications services would drastically reduce service costs.
NorVergence falsely marketed its “Matrix” box as a way to fully integrate all telecommunications services including long distance DSL and wireless phone service.
In fact the Matrix box was a near worthless piece of equipment that provided little or no benefit to business owners despite the fees customers were charged for box rentals.
