SEATTLE – At least eight Washington state small businesses and nonprofits that lost phone and Internet services when their telecommunications provider, NorVergence, Inc., went bankrupt last year will not have to pay the full amount due on their rental contracts, the Washington State Attorney General’s Office announced today.
Wells Fargo Financial Leasing, which owned the equipment and service rental agreements for a few hundred of NorVergence’s thousands of customers nationwide, agreed to reduce their balances under an agreement reached today with 19 states and the District of Columbia.
“NorVergence deceptively marketed a telecommunications package to small businesses and nonprofits, then sold its rental agreements to various finance companies including Wells Fargo Financial Leasing,” Attorney General Rob McKenna said. “NorVergence went out of business soon after but customers continued to receive bills from Wells Fargo and other financial companies.
“The attorneys general who negotiated this settlement allege that the rental agreements were void and unfair, and that Wells Fargo Financial Leasing knew or should have known about the fraud perpetrated by NorVergence,” McKenna continued.
Wells Fargo 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.
Wells Fargo Financial Leasing agreed to reduce the amount of debt for 261 customers nationwide.
As of today, the Attorney General’s Office had identified eight Washington customers that could benefit from the settlement, with the potential for several more. McKenna said the settlement will put $139,540 back in the hands of those business owners, should they choose to participate. However, Wells Fargo would collect about $22,700 from the companies involved in the case.
Nationwide, the company will forgive approximately $7.3 million in lease payments.
To participate, customers must pay all charges, late fees and taxes owed through July 31, 2004. Wells Fargo will forgive 86 percent of the remaining contract balance thereafter. Settlement letters will be going out to affected businesses within the next 30 days.
The attorneys general of Illinois, North Carolina, Massachusetts, Pennsylvania, and Texas, and the Federal Trade Commission have sued NorVergence, alleging that the former New Jersey-based company’s business practices violated consumer protection laws.
NorVergence rented a “Matrix” box purported to provide local, long-distance and wireless phone services and Internet service at a reduced rate. Customers typically agreed to pay $500 to $2,000 per month for a period of three to five years as rental for the boxes. However, the boxes did not provide the advertised services.
NorVergence secured contracts with as many as 11,000 customers nationwide then sold the rental agreements to approximately 40 different finance companies. NorVergence was forced into bankruptcy by its creditors in June 2004.
The states are now pursuing negotiations with other finance companies.
For more information contact:
Kristin Alexander, (206) 464-6432, KristinA1@atg.wa.gov