New York AG Takes Action Against Credit Card Processing Company for Alleged Deceptive Practices

State Attorney General

Recently, New York AG Schneiderman filed a lawsuit against a New York-based credit card processing company, several affiliated companies, and select owners and officers of the companies over alleged fraudulent and deceptive practices. According to the AG’s office, the companies “trapped small businesses into never-ending lease agreements for over-priced credit card processing equipment and abused the judicial process by suing to collect on [those] leases in the Civil Court of the City of New York, regardless of whether the debt is fraudulent, the claim is timely or legitimate efforts to terminate the lease were ignored.” The AG investigation found that the companies targeted small business owners through its deceptive practices, which included (i) inducing individuals to sign lease agreements without realizing they were doing so; (ii) falsely representing the lease as “free” or a way to save money; and (iii) falsely informing consumers that he or she could cancel the lease at any time. In addition, the AG investigation also revealed that in many instances consumers alleged that the signatures on the leases were not theirs or that material terms were added to the lease without their knowledge. AG Schneiderman also alleges that the companies harassed consumers with threatening phone calls and letters, asserting that consumers would be sued if they did not make the payments on their leases. According to AG Schneiderman, between 2010 and 2015, the companies filed over 30,000 collection actions in the New York City Civil Court (NYC Civil Court), and obtained more than 19,000 default judgments against individual consumers in NYC Civil Court since 2010. The AG’s lawsuit against the companies seeks to, among other things, (i) vacate default judgments against consumers; (ii) permanently prohibit the companies and its owners and officers “from continuing their deceptive business practices”; and (iii) pay restitution to consumers.