Attorney General's News Release

August 24, 2006

NorVergence customers with contracts taken over by Popular Leasing USA eligible for refunds, debt forgiveness

Jefferson City, Mo. — More than 20 Missouri small businesses stuck with onerous long-term rental agreements for telecommunications equipment and services they weren't able to use will have more than $461,000 in debt under those contracts forgiven by a finance company, under a 21-state settlement led by Attorney General Jay Nixon. In addition to forgiving the $461,000, Popular Leasing USA also will provide refunds of $33,049 for debts already paid by the 21 businesses.

The Missouri businesses originally had agreements with NorVergence, a now-defunct telecommunications company from New Jersey. NorVergence rented the businesses a "matrix" box for anywhere from $200 to $4,000 a month, claiming the matrix boxes would integrate and provide telephone, wireless and internet services while reducing telephone and Internet bills by 30 percent. The rental agreements usually were for three to five years; NorVergence sold the rental agreements to some 40 different finance companies, including Popular Leasing USA.

When the boxes didn't work as promised, NorVergence was forced to provide renters with equipment from other providers. NorVergence stopped paying those providers before being forced into bankruptcy in June 2004. Even though customers no longer were receiving the services, Popular Leasing USA and the other finance companies claimed that NorVergence customers were still responsible for the rental agreement payments.

"We were concerned that small businesses and other consumers who entered into rental agreements with NorVergence were stiffed when the company went bankrupt," Nixon said. "Instead of receiving cheaper telephone and Internet service, consumers were left with no service and an expectation from the finance companies to keep paying for that non-existent service until the end of the contract."

Nixon said Missouri, 20 other states and the District of Columbia have reached an agreement with Popular Leasing USA to either refund or not collect more than $15 million from nearly 650 customers, including the 21 in Missouri. Missouri was one of the lead states in the multi-state group. Earlier, the group of states had signed settlements with 10 other finance companies to not collect more than $37 million in rental payments from approximately 1,700 NorVergence customers.

The settlements also resolve the states' concern that Popular Leasing USA and the other finance companies charged consumers for replacement insurance premiums based on the total rental contract amount, not just the much smaller value of the matrix box, driving up the cost of the five-year rental agreements signed by the businesses.

In addition to the refunds and the debt forgiveness, Popular Leasing USA has agreed not to enforce a waiver of jurisdiction clause against all its NorVergence customers.

All customers who signed agreements with NorVergence that were bought by Popular Leasing USA will receive notices by mail regarding the opportunity to participate in this settlement. To accept the settlement offer, consumers must follow instructions contained in the notice and execute a settlement and mutual release by the date indicated in the notice.

Customers who had not previously reached a settlement with Popular Leasing USA and who accept the states' settlement will pay the finance company 15 percent of their remaining balance as of July 15, 2004. Customers who previously reached their own settlements with Popular Leasing USA and who paid more than 20 percent of their remaining balance as of July 15, 2004 will receive a refund of the amount they paid over 20 percent. Customers are not obligated to accept the settlement obtained by the states.

Besides Missouri, the other states participating in the settlement are California, Colorado, Connecticut, Delaware, Georgia, Illinois, Iowa, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, New Hampshire, North Carolina, Ohio, Pennsylvania, Rhode Island, Washington and West Virginia.

Inquiries from consumers should be directed to consumer@ago.mo.gov or 1-800-392-8222 (from within Missouri) or 573-751-3321 (outside Missouri).

All media inquiries should be directed to Press Secretary John Fougere.

E-mail      Phone: 573-751-8844         Fax: 573-751-5818