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NY AG claims fraud by NYC leasing company

Michael Virtanen, Associated Press

ALBANY, N.Y. (AP) -- New York Attorney General Eric Schneiderman on Monday sued a company that leases credit card machines to small businesses, claiming Northern Leasing Systems Inc. fraudulently attempted to drain more than $10 million from 100,000 former customers with expired leases.

The attorney general's office said the Manhattan-based company kept at least $3.5 million from the scheme launched in March 2011, while disguising it by working through a shell company called SKS Associates LLC. The complaint also names Northern Leasing affiliates Lease Finance Group LLC, MBF Leasing LLC, Golden Eagle Leasing LLC and Lease Source-LSI LLC all operating from the same address.

"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.

The lawsuit filed in state Supreme Court in Manhattan seeks restitution, disgorgement of profits, penalties and fees. Schneiderman says the investigation was prompted by more than 70 complaints, and the company claimed it was collecting taxes and administrative fees previously unpaid.

"The taxes and fees in question were clearly called for in the lease agreement with our customers," Northern Leasing said Monday. "The company looks forward to demonstrating this to the satisfaction of everyone concerned. We have always prided ourselves on the fairness of our business practices."

The attorney general's complaint noted at least two class-action lawsuits and hundreds of complaints against Northern Leasing alleging predatory sales practices and deceptive lease agreements from customers, many of which are sole proprietors or mom-and-pop retailers. Leases typically had four-year terms with automatic monthly payments that required customers to give their checking account and bank routing numbers.

"Ultimately, over 77 percent of the amounts sought by SKS were not even taxes at all but merely alleged 'fees' related to the taxes," the complaint said. "Respondents debited former customers with expired contracts, including many customers who had received releases from their contracts when they executed buyout options to purchase the equipment."

Northern Leasing describes itself as an established provider of third-party equipment leasing services that enable business owners to finance point-of-sale and other key equipment components, that it also provides financing for equipment and leasing, and was established in 1991.