SEATTLE – Six small businesses in Washington state that lost phone and Internet services when their telecommunications provider, NorVergence, Inc., went bankrupt in 2004 will not have to pay the full amount due on their rental contracts, the Washington State Attorney General’s Office announced today.
National City Commercial Capital Company LLC agreed to issue refunds or reduce the debt of 381 former NorVergence customers nationwide as part of an agreement reached today with 22 states.
NorVergence claimed its “Matrix” box would deliver unlimited broadband, landline and cell phone service with no per-minute charges. Customers who rented boxes typically agreed to pay $500 to $2,000 per month for a period of three to five years. The Federal Trade Commission contended that the boxes were actually standard integrated access devices or sometimes just firewalls that neither lived up to the claims nor saved customers money.
NorVergence signed up more than 9,000 consumers nationwide then sold the rental agreements to approximately 40 different finance companies before being forced into bankruptcy by its creditors in June 2004.
“The states that negotiated this settlement allege that the rental agreements were void to begin with,” said Assistant Attorney General David Huey. “National City Commercial Capital Company and the other finance companies who bought the agreements should have known about the fraud perpetrated by NorVergence.”
National City denies any wrongdoing but has agreed to reduce the outstanding debt for customers who agree to the settlement offer and to correct any adverse credit information that resulted from customers not making payments. Nationwide, the company will forgive more than $7.2 million in lease payments.
Huey said the settlement will put $151,590 back in the hands of Washington business owners, should they choose to participate. Most of this amount will be paid in the form of debt forgiveness, while some business owners may receive refunds.
To participate, customers must pay all charges, late fees and taxes owed through July 15, 2004. National City will forgive 85 percent of the remaining contract balance thereafter, as well as any late fees or other penalties. The company will also forgive 80 percent of the remaining contract balance for customers who previously settled with the company. Settlement letters will be going out from National City to affected businesses within the next 30 days. The businesses will then have 35 days to respond.
Besides Washington, the following states participated in the National City agreement: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Kansas, Louisiana, Massachusetts, Maryland, Michigan, Missouri, North Carolina, New Hampshire, Ohio, Pennsylvania, Rhode Island, Virginia and West Virginia.
Fourteen finance companies have agreed to reimburse customers under agreements reached by the states.
The Federal Trade Commission sued NorVergence, alleging that the former New Jersey-based company’s business practices violated consumer protection laws. The FTC settled charges against the company’s founders, Thomas N. Salzano and Peter J. Salzano, in June. The final court orders bar the Salzanos from engaging in all fraudulent and deceptive conduct alleged in the complaint, require them to make specific disclosures when pitching products in the future, and subject them each to $50 million judgments, which were mostly suspended.
Media Contacts: Kristin Alexander, Media Relations Manager – Seattle, (206) 464-6432
David Huey, Assistant Attorney General, (253) 593-5057