N.Y. AG alleges $10M scam

Bryan Cohen Apr. 23, 2012, 1:18pm


NEW YORK (Legal Newsline) - New York Attorney General Eric Schneiderman announced a lawsuit on Monday against a group of New York City-based companies that allegedly used fraudulent practices to siphon money from their former customers.

Northern Leasing Systems Inc. and its affiliates lease credit card processing machines and other equipment to small businesses. The defendants allegedly siphoned more than $10 million in unauthorized debits from the bank accounts of more than 100,000 former customers. The debits, which occurred up to 11 years after the expiration of the company's equipment leases, allegedly retaining at least $3.5 million.

Northern Leasing and its affiliates -- Lease Source-LSI LLC, Golden Eagle Leasing LLC, MBF Leasing LLC and Lease Finance Group LLC -- allegedly used shell company SKS Associates LLC to mislead customers and to avoid harm to Northern Leasing's reputation as a business. Tens of thousands of former Northern Leasing customers were unaware that the automatic debits had been taken from their bank accounts by a company with which they had never done business, Schneiderman says.

"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," Schneiderman said.

"We will seek both restitution for defrauded customers and substantial penalties from the companies to ensure justice and accountability prevail. 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."

Schneiderman's office received more than 70 complaints from around the country about SKS.

Northern Leasing allegedly set up the collection scheme with SKS to seize the administrative fees years after the leases expired and make it less likely that people would battle the charges.

All collections were allegedly channeled through SKS, which began to withdraw money from the former customers before it had registered to legally conduct business.

SKS sent out notice letters, with many allegedly sent out the same day or only one day prior to the debits. After SKS received many telephone calls from irate customers, the company allegedly stopped sending notice letters entirely and began taking money from the bank accounts of former customers without any notice whatsoever. In multiple cases, SKS allegedly debited former customers who had exercised buyout options to buy the leased equipment and had been given releases from any additional claims.

Schneiderman's lawsuit seeks full restitution for the former customers allegedly defrauded in the scheme, injunctive relief prohibiting Northern Leasing and its affiliates from engaging in deceptive collection practices, and the disgorgement of all penalties, profits and fees.

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