June 8, 2007
In the wake of the NorVergence Inc. telecommunications fraud case won by the Federal Trade Commission in 2005, the agency has charged IFC Credit Corporation with violating federal law by helping to finance the scheme and continuing to seek payment from defrauded consumers.
Texas sued the same company just a few days ago.
Based on an FTC complaint filed in 2004, a federal court voided 1,600 NorVergence contracts with small businesses and religious and other nonprofit organizations that were misled by promised savings on phone and Internet services.
The contracts purported to be long-term rental agreements for a relatively inexpensive device that NorVergence falsely claimed would create the savings.
NorVergence was forced into bankruptcy, and the promised services stopped. The judgment the FTC obtained against NorVergence left unaffected thousands of rental agreements NorVergence had already sold to finance companies.
According to a complaint filed by the FTC, IFC Credit Corporation purchased NorVergence rental agreements valued at $21 million, with individual contracts ranging from $4,439 to $160,672. Despite making payments, the complaint alleges, no customers received telecommunications services from NorVergence for more than a short period of time, and many consumers received none.
As stated in the complaint, IFC continued to finance the fraudulent scheme by accepting new rental contracts, despite NorVergence's failure to provide the promised services and the resulting high rate of default among IFC customers.
Long after NorVergence entered bankruptcy in 2004, the complaint states, IFC continues to tell consumers they are obligated under the rental agreements because the payments are for the device, not for services.
Under the FTC Act, which prohibits unfair or deceptive business practices, the FTC charges IFC with misrepresenting that consumers have no defenses to payment on the NorVergence rental agreements; harming consumers by unfairly accepting and collecting on the rental agreements; and unfairly filing debt collection lawsuits in courts far from consumers locations.
In Texas, Attorney General Greg Abbott asked a Harris County District Court to prevent IFC Credit from attempting to recover fraudulently incurred debts from Texas small businesses and nonprofits.
Small businesses are critical to the success of Texas economy, said Attorney General Abbott. The Office of Attorney General is committed to protecting small business owners from fraudulent schemes and unlawful debt collection practices. Texans can rest assured we will aggressively protect NorVergence victims from continued suffering because of this illegal, fraudulent scheme.
