Texas small businesses protected in telecommunications fraud case

Nick Rees Nov. 13, 2008, 8:27am

HOUSTON (Legal Newsline) - Texas Attorney General Greg Abbott said Thursday that small-business owners in Texas will benefit from his settlement with the credit company that purchased a now-defunct company.

NorVergence Inc. sold worthless telecommunications services to small businesses, Abbott said. When NorVergence went out of business, IFC Credit Corp. purchased NorVergence's customer accounts in a 2004 contract.

IFC Credit Corp. purchased the $21 million in uncollected telecommunications business accounts at a large discount.

The State contends that IFC Credit Corp. should have been aware that the customers had been deceived into financing worthless telecommunications equipment.

NorVergence marketed the "Matrix" box, a nearly worthless piece of equipment said to integrate long distance, DSL and wireless phone service, under false pretenses as the box provided little to no benefit to customers, Abbott said.

Customers who rented the box were then coerced into deceptive rental agreements that put the customers into a five-year revolving debt cycle, Abbott said. Rental agreements owed by customers allegedly ranged from $4,000-$160,000.

IFC Credit Corp. denies knowing of the deceptive practices.

IFC Credit Corp. was charged with unlawfully attempting to collect monies from small business owners from NorVergence contracts in several states in 2007 by the attorney general.

Under terms of the agreement, IFC Credit Corp. will release small-business debtors in Texas from their financial obligations incurred from purchasing NorVergence's products. The State maintains that the transactions were based on a deliberate scheme to defraud customers.

IFC Credit Corp. will not be allowed collect monies from customers after NorVergence's July 2004 declaration of bankruptcy.

Customers must still, however, satisfy debts incurred prior to July 15, 2004, under terms of the agreement. IFC Credit Corp. will forgive approximately 84 percent of the post-July 15 contract balances and 100 percent of the late fees incurred by delinquent debtors.

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