When I was first sued by Russ Whitney, I did Web searches to find out more about him. Frequently, his name came up along with the name Leasecomm. Whitney invited a company called E-Commerce Exchange to make a pitch to Whitney’s customers or leads (prospective customers attending free seminars) regarding starting your own home-office Web business. Those who wanted to do so were directed to the back of the room where they were to sign a Leasecomm lease. In the Federal Trade Commission Documents below, they speak often of the companies that provided Leasecomm with the signed leases that are the subject of the FTC action against Leasecomm. Whitney and E-Commerce Exchange, with whom they still partner, are among the companies the Federal Trade Commission is talking about when they discuss how Leasecomm got these leases. In the documents below, I have put the words and phrases that the FTC apparently means to apply to Whitney and E-Commerce Exchange and other companies like them in bold red type.
People at various Web sites were howling mad at Leasecomm. I called their CEO Peter Blyleben, who was a section mate of my wife at Harvard Business School and talked to him about it. He said they had stopped doing business with Whitney, who came to them through E-Commerce Exchange rather than direct. He also said they had stopped doing business with seminar companies in general. For his part, Whitney says he stopped doing business with Leasecomm in 2001.
I also went to Woburn, MA, Leasecomm’s headquarters and extracted some documents from the court house involving Leasecomm suing one of Whitney’s customers for nonpayment of the lease. She complained she had not received anything for the money. She was in Ohio and lost a default judgment for more than $3,000 in MA.
The Federal Trade Commission and the attorneys general of the following states did a joint task force against Leasecomm that resulted in the $24 million settlement:
• Florida
• Illinois
• Kansas
• Massachusetts
• North Carolina
• North Dakota
• Texas
as well as the District Attorney of Ventura County, California.
You can read a synopsis of the case at http://www.ftc.gov/opa/2003/05/leasecomm.htm. I’ll put it here also because other people’s Web sites often change and then my link to them no longer works.
For Release: May 29, 2003
Business Opportunity Lender Settles FTC Charges
Settlement Will Cancel $24 Million in Deceptively Obtained Judgments
Against Consumers
A finance company that allegedly used shady agents, deceptive contracts, and
false claims to target thousands of would-be entrepreneurs will cancel $24
million in judgments allegedly obtained through deception and will reform all
business opportunity financing contracts to settle charges by the Federal Trade
Commission and an eight state task force that the practices violated federal
and state laws. The law enforcement agencies charged that Leasecomm
financed the purchase of business opportunities such as work-at-home
operations using business opportunity sellers as its agents. According to the
FTC, the contracts contained provisions purporting to waive consumers'
defenses and allowing Leasecomm the right to sue consumers in
Massachusetts, where it is based, rather than where consumers lived and
purchased the business opportunity. The FTC alleged that most consumers
could not afford to travel to Massachusetts to contest Leasecomm's charges
and had default judgments entered against them in the Massachusetts court.
If they didn't pay, Leasecomm resorted to aggressive collection measures
such as wage garnishment and property attachment to collect, even though
Leasecomm knew or should have known that their vendors used deceptive
practices to sell their business ventures and promote the financing, according
to the FTC's complaint.
Leasecomm is a wholly-owned operating subsidiary of MicroFinancial
Incorporated. Both companies are based in suburban Boston, Massachusetts.
"Leasecomm's customers got a one-two punch," said Howard Beales, Director
of the FTC's Bureau of Consumer Protection. "Leasecomm used sellers of
highly suspect business opportunities to sell its financing, and then claimed it
had no responsibility for their deception. Companies that try to hide behind
the fine print in contracts and lie to consumers about what they're were
signing, whether directly or through agents, simply do not pass muster."
"Leasecomm knowingly participated in a scheme that used the 'get-rich-quick'
allure of selling products on the Internet to take advantage of thousands of
consumers who were ultimately forced into debt," Massachusetts Attorney
General Tom Reilly said. "This agreement relieves the debts of customers who
fell prey to these 'business opportunities' and helps protect future consumers
by requiring Leasecomm to change its business practices."
According to the FTC, the scheme worked as follows: Leasecomm Corporation
financed business opportunities, including Internet web malls, multilevel
marketing programs, medical billing software, coupon clipping programs and
similar, often worthless, get-rich-quick schemes sold by third-party vendors.
Consumers typically made little or no up-front payments, but signed a
contract, which Leasecomm called a lease, requiring payments ranging from
$3,000 - $4,000 over a three or four year period. While consumers thought
the contracts covered many items included as part of a business venture --
training, Web site design, and consumer leads, for example -- they didn't.
They covered only one small part of the venture -- a "virtual terminal," for
example.
Leasecomm drafted its contracts to ensure that customers paid even when the
vendors used misrepresentations or fraud, or when the products or services
failed to perform as represented, according to the FTC complaint. The FTC
alleges that Leasecomm knows or should know that many of its vendors
engage in deceptive practices to sell their business ventures. In one case, a
vendor signed up 1,882 consumers for a "business opportunity,"and nearly
1,500 went into default, the complaint alleges. Nevertheless, Leasecomm
aggressively collected from many of those customers. Leasecomm pursues its
customers "even when the customers have been defrauded and received
nothing of value," the complaint alleges. When consumers argued that the
lease really financed an entire business venture that was fraudulent and that
the virtual terminal was worthless without the other elements of the package,
Leasecomm took the position that the consumer still had an obligation to pay
in full. When consumers set up their own internet Web sites to share
information on how to fight Leasecomm, company employees falsely posed as
consumers and made misleading statements about other consumers'
absolute obligation to pay Leasecomm, according to the complaint.
According to the FTC, when consumers failed to pay, Leasecomm sued them.
The FTC alleges that Leasecomm has sued over 27,000 consumers in the
past three years in Massachusetts courts, and, as of January, had 2,200 suits
pending. Few of the customers could afford the expense of litigation in a
distant city and most suffered default judgments the FTC alleges. Although
Leasecomm files its suits in Massachusetts, it aggressively enforces its
judgments in the consumer's local forum. "Had Leasecomm filed the suits in
the local forum in the first instance, customers might have been able to
appear and present a defense," the complaint says. According to the FTC,
Leasecomm adds to the consumer injury by imposing high collection fees, not
only for late payments, but for every collection call it makes and letter it
sends. These practices substantially increase the total payments due under
the Leasecomm contract, the complaint says.
Leasecomm, and its parent corporation, Microfinancial, Inc., have agreed to
settle the FTC charges and similar suits filed by members of the State Task
Force, comprised of the attorneys general of Massachusetts, Florida, Illinois,
Kansas, North Carolina, North Dakota and Texas, and by the District Attorney's
Office for Ventura County, California. "This is an excellent example of
federal-state law enforcement cooperation," Beales said.
The settlement will:
bar misrepresentations about the terms of any contract -- including
misrepresenting that consumers cannot raise defenses against
Leasecomm;
require disclosure of material facts about a contract, including
disclosure that Leasecomm, not the vendor, is financing the
transaction;
require that if Leasecomm sues consumers, it does so "where the
customer resides or signed the contract;"
require Leasecomm to vacate pending lawsuits filed in the wrong forum
and correct any damage to the consumer's credit record;
require that Leasecomm invalidate illegal provisions of existing
contracts, including waivers of defenses;
require that Leasecomm cancel and cease collections on approximately
$24 million in final court judgments;
require that Leasecomm give consumers who are the target of more
than 2,000 pending Leasecomm lawsuits currently filed in
Massachusetts the option of having the suit conducted locally;
require that consumers who were unlawfully required to agree to
electronic funds transfers be given the option to switch to another
payment method.
The settlement also contains certain bookkeeping and record keeping
provisions to allow the agency to monitor compliance with its order.
The FTC vote to accept the settlement was 5-0.
The FTC has set up a special Web site for consumers who may be affected by
this case at http://www.ftc.gov/ro/leasecomm/index.htm. It also has
established a special phone number to provide information for consumers at:
202-326-3445.
NOTE: A stipulated final judgment and order is for settlement purposes only and does not
constitute an admission of guilt. Stipulated final judgments and orders have the force of
law when signed by the judge. The order was filed in the United States District Court for
the District of Massachusetts.
Copies of the complaint and stipulated final judgment and order are available from the
FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response
Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC
works for the consumer to prevent fraudulent, deceptive, and unfair business practices in
the marketplace and to provide information to help consumers spot, stop, and avoid them.
To file a complaint, or to get free information on any of 150 consumer topics, use the
complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing, identity
theft, and other fraud-related complaints into Consumer Sentinel, a secure, online
database available to hundreds of civil and criminal law enforcement agencies in the U.S.
and abroad.
MEDIA CONTACT:
Claudia Bourne Farrell,
Office of Public Affairs
202-326-2181
STAFF CONTACT:
Randy Brook or Bob Schroeder
Northwest Region
206-220-6350
(Civil Action No. 0311034- REK)
You can read the actual complaint at http://www.ftc.gov/os/2003/05/leasecommcmp.htm. Again, I will put it here in case they change that link:
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
LEASECOMM CORPORATION and
MICROFINANCIAL INCORPORATED, Defendants
CIVIL ACTION NO.
COMPLAINT FOR INJUNCTIVE AND
OTHER EQUITABLE RELIEF
Plaintiff, the Federal Trade Commission ("Commission"), by its undersigned attorneys, alleges:
1. This is an action under Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C. §§ 53(b) and 57b, to secure preliminary and permanent injunctive relief, including rescission of contracts, cessation of collections and other equitable relief, for defendants' unfair or deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), and the Electronic Funds Transfer Act, 15 U.S.C. § 1693k, in connection with financing of business ventures and other items provided to individuals and small businesses.
JURISDICTION AND VENUE
2. This Court has jurisdiction over this matter pursuant to 15 U.S.C. §§ 45(a), 53(b), and 57b, and 28 U.S.C.
§§ 1331, 1337(a), and 1345.
3. Venue is proper in the United States District Court for the District of Massachusetts under 15 U.S.C. § 53(b)
and 28 U.S.C. §§ 1391(b) and (c).
PLAINTIFF
4. Plaintiff Federal Trade Commission is an independent agency of the United States Government created by
statute. 15 U.S.C. §§ 41-58. The Commission enforces Section 5(a) of the FTC Act, 15 U.S.C. § 45(a), which
prohibits unfair or deceptive acts or practices in or affecting commerce. The Commission may initiate federal
district court proceedings by its own attorneys to enjoin violations of the FTC Act, including redress for injured
consumers. 15 U.S.C. §§ 53(b), and 57b. The Commission also enforces the EFTA, and violations of the EFTA
are violations of the FTC Act. 15 U.S.C. § 1693o(c).
DEFENDANTS
5. Defendant MicroFinancial Incorporated ("MicroFinancial") is a Massachusetts corporation with corporate
headquarters located at 10M Commerce Way, Woburn, Massachusetts. It transacts business in this district.
MicroFinancial stock is publicly traded on the New York Stock Exchange.
6. Defendant Leasecomm Corporation ("Leasecomm") is a wholly-owned subsidiary of MicroFinancial with a
principal place of business also located at 10M Commerce Way, Woburn, Massachusetts. It transacts business in
this district.
COMMERCE
7. At all times material hereto, defendants have been engaged in the business of providing financing to
individuals and small businesses, and the related business of collecting alleged debts for that financing, in or
affecting commerce, as "commerce" is defined in Section 4 of the FTC Act, 15 U.S.C. § 44.
DEFINITIONS FOR PURPOSES OF THIS COMPLAINT
8. "Customer" is any natural person who is individually liable to pay Leasecomm for financing, either directly or
indirectly, e.g., as a cosignor, guarantor, proprietor, or signatory general partner.
9. "Business venture" includes purported profit making ventures (e.g., multilevel marketing programs, pyramid
schemes, buyers' clubs, coupon clipping programs, investment opportunities, etc.), regardless of how
participation in the venture is characterized (e.g., as investors, members, donors, etc.), seminars, or
promotions that seek to induce customers to make money through business or investment, or similar intangible
items.
DEFENDANTS' BUSINESS ACTIVITIES
10. Leasecomm's principal business since at least 1997 has been providing financing through contracts it calls
"leases" to individuals and small businesses. The contracts purport to be leases for items such as point-of-sale
credit card swiping machines ("POS machines") and Internet-based, online payment systems ("virtual
terminals"), which have often been sold as part of a purchase of a business opportunity or profit making
venture. The business opportunities and profit making ventures include Internet web malls, multilevel
marketing programs, pyramid schemes, medical billing software, coupon clipping programs, and similar, often
worthless get-rich-quick schemes that consumers have been duped into buying by deceptive practices of the
business venture sellers. A typical lease requires total payments of $3,000-4,000 over a 3-4 year period.
11. Customers usually make no upfront payment for their business venture purchase. Instead, the business
venture vendors, acting as Leasecomm's agents for selling financing, procure customers' signatures on
Leasecomm financing contracts for all or most of the cost of the business venture. After making a successful
sales pitch, the vendor presents the Leasecomm contract to the customer amid the various papers the customer
signs. Customers have little opportunity to read or understand the complex Leasecomm contracts, which the
vendors virtually never explain to them. Even if customers did read all the fine print in the contract, it is unlikely
that they would understand or appreciate the rights and remedies that fine print attempts to take away from
them. Leasecomm expressly prohibits its vendors from negotiating over or changing any of the contract's
boilerplate terms.
12. Typically the only payment the seller receives for the business venture is a lump-sum payment from
Leasecomm. In some cases Leasecomm splits the payment between the vendor and a supplier of other goods
or services associated with the business venture, like the provider of a POS machine or merchant account
services. Thus, Leasecomm is actually financing the whole business venture.
13. Based on the sales pitch by the vendors, customers think they are signing a financing agreement for the
entire business venture they are purchasing. In fact, even though the monthly payments under the lease cover
the full price of the business venture package plus finance charges, the lease purports to only finance a POS
machine or virtual terminal, a computer software license, or some other item that is an incidental part of the
business venture. For example, a typical sales contract lists many items included as part of a business venture
(e.g., training, web site design, customer leads, a manual, forms, software, merchant account) for a specified
price per month (e.g., $70) over a specified term (e.g., 4 years). The corresponding Leasecomm contract in
this example would also be for the $70 per month and over 4 years, but would state as the item being financed
only one component of the business venture (e.g., a POS machine). Nonetheless, what the customers
understand and believe is that for payments of $70 per month over a 4 year period they are purchasing the
entire business venture.
14. Leasecomm does not allow its vendors to fill in finance contracts with a truthful description of the business
venture. Leasecomm makes the finance contract look like an equipment lease, because Uniform Commercial
Code Article 2A ("UCC Art. 2A") equipment lease provisions are significantly more favorable to creditors than the
provisions relating to non-lease finance contracts. Finance contracts for business ventures and other general
intangible items cannot qualify as Art. 2A leases.
15. For web-based business ventures, the specified item financed in the Leasecomm lease is often a "virtual
terminal." This is not a tangible piece of equipment that can be owned by Leasecomm as a lessor or the
customer. Rather it is simply the setting up of an online point of sale authorization system and the information
necessary to access that account. Virtual terminals are typically available at little or no cost from alternative
sources, such as merchant account providers and processors, who then charge the customer a commission when
charges or debits are made, plus a small monthly fee.
16. The customer will receive a contract for virtual terminal services included in the papers the vendor provides,
along with the sales contract for the principal items being sold (e.g., training, web site design, customer leads,
a manual, forms, software, merchant account) and the Leasecomm contract. The virtual terminal service
contracts are generally cancellable by either party upon relatively short notice (e.g., one month). The "lease"
that Leasecomm writes for that virtual terminal, however, is not cancellable for 36-48 months.
17. The deception continues when Leasecomm and its vendors fail to disclose to customers material facts about
the transaction that would lead them to question whether they should enter into the business venture
transaction or the finance contract. Leasecomm and its vendors do not explain the involvement of Leasecomm
in the transaction so that customers are often unaware that they are entering into a financing transaction with a
third party. They also do not explain that the contract purports to make the customer's obligation to pay
Leasecomm absolute, that this obligation to pay is based solely on the customer's acceptance of the POS
machine or virtual terminal or other item financed, that the customer is agreeing to waive defenses including the
defense of fraud in the inducement, and that these provisions may not be enforceable under applicable contract
law. Finally, they do not explain that the contract provides that any disputes under the contract will be resolved
in a forum distant from the customer's residence.
18. Leasecomm drafts its lease contracts to ensure that customers pay even when the agreement to enter into
the lease or the underlying business venture transaction is induced by Leasecomm's vendors'
misrepresentations or fraud, or when the products or services fail to perform as represented. Most lease
contracts contain a provision that tells customers that they cannot assert any defense or counterclaim:
I fully recognize your right to enforce the lease free from any current or future defenses, offsets or
counterclaims.
Most lease contracts also contain a second provision that sets the location for filing collection suits in
Massachusetts, regardless of where the customer resides or signed the contract. A typical form of that provision
is:
The Parties hereby . . . consent and submit to the jurisdiction of the Courts of the Commonwealth
of Massachusetts and express agree to such exclusive forum for the bringing of any suit, action or
other proceeding arising out of their obligations hereunder, and expressly waive any objection to
venue in any such Courts . . .
Other provisions require that customers agree to automatic debiting of their bank accounts and require that
customers sign a personal guarantee of the lease contract.
19. Leasecomm knows or should know that many of its vendors engage in deceptive practices to sell their
business ventures. Leasecomm employees maintain a close relationship with its vendors, and Leasecomm uses
a computerized system to track delinquent accounts, default rates, and customer complaints of vendor fraud or
misrepresentation. The default rate with respect to particular business ventures often exceeds 30%, and with
some vendors has exceeded 50%. Leasecomm also receives large numbers of customer complaints about
misrepresentation or fraud concerning these vendors. Despite possessing evidence of serious problems with
vendors, Leasecomm rarely terminates a vendor. Instead, it simply reduces the payment it makes to the
vendor, retaining a larger share of the customers' payments for itself.
20. Leasecomm does not apply the usual finance industry standards for granting credit. First, the value of the
equipment purportedly leased by Leasecomm has no relationship to the value of the lease. POS terminals,
which Leasecomm leases for as much as $4,000, have retail value of $400-500 and wholesale cost of
approximately $250. Virtual terminals, leased for the same amount, essentially have little or no value. Second,
the credit worthiness of the customer is rarely used to deny credit. Instead, Leasecomm applies a matrix for
rating both the vendor and the customer to set a discount rate for the lease.
21. Leasecomm's approach to debt collection is very aggressive. It uses the contract provisions described in
Paragraph 18, above, to the fullest extent possible to obtain payment from customers and obtain judgments, if
necessary. This is true even when the customers have been defrauded and received nothing of value.
22. Leasecomm is usually unresponsive to customers' disputes or claims of fraud against vendors. It relies
heavily on the wording of the contract to tell customers that they have no defense to Leasecomm's demand for
payment. For example, collectors will point out that the customer accepted a POS machine and that was the only
product named in the lease. When the customers argue that the lease really financed an entire business
venture that was fraudulent, and the POS machine was worthless without the rest of the package, the collectors
will still insist that obligation to pay in full is absolute and that the customers have no defense.
23. One example of how Leasecomm treated complaints of fraud involved InfoDirect, a vendor that ran a
pyramid scheme. Its organizers made their money by requiring the purchase of overpriced computers, financed
by Leasecomm, to participate in the scheme. According to Leasecomm's own complaint records, the computers
(if delivered at all) were typically low-end or used and defective models leased for $3,300. The total lease
volume was $5.2 million. Of the 1,882 deals, 1,483 went into default, most early in the lease term.
24. Leasecomm wrote letters to InfoDirect complaining about the poor payment rate. Nonetheless, it continued
to accept new leases for nearly a full year after it had notice from customer complaints and defaults that there
was a serious problem with the product delivered. Leasecomm also sued one-third of the InfoDirect customers
for non-payment.
25. Another example involved one of Leasecomm's largest vendor for virtual terminal business ventures at
seminars, Executive Credit Services. This company accounted for $16 million in business during 1999-2000, with
nine thousand customers and a default rate of over 30%. Leasecomm's internal records show many complaints
about software and websites never working. Leasecomm rejected virtually every claim. An example of a "reason"
for rejecting a claim was:
83 year old lessee claims he was misled. [Lessee] signed a non-cancellable lease
agreement/merchant acct application ext all docs showed what the charges were for each/ it states
right on the lease that if the person does not understand the lease they should seek legal advice
The fact that Executive Credit Services sold its business ventures at seminars means that customers had little
chance to read over all the purchase and finance documents, and even less opportunity to consult with a lawyer
before signing them.
26. Another example involved Roma Computer, a company selling worthless web site business ventures.
Leasecomm financed the computers that customers purchased, ostensibly to access their website. One customer
complained that she "received the equipment, but never used it; still has equipment; was under the impression
after seminar that they would get a website and could make lots of money." [Cryptic spellings from
Leasecomm's complaint database expanded for readability.] The customer also complained about not receiving
an expected printer. Leasecomm denied the complaint completely because "the free printer has nothing to do
with the lease agreement." Leasecomm simply ignored the complaint about the worthless website business
venture.
27. Leasecomm employees also make deceptive statements on the Internet concerning customers' ability to
raise defenses to paying. There are a number of Internet websites set up for customers to share information on
how to deal with Leasecomm. Employees of Leasecomm, acting under pseudonyms and denying their
connection to Leasecomm, regularly post messages with misleading statements about customers' lack of
defenses and their absolute obligation to pay Leasecomm.
28. Contrary to representations by Leasecomm, customers have a number of substantive defenses that could
be raised, particularly where business ventures or other intangible items are financed. The most significant is
that business ventures or other intangible items are not subject to being leased under UCC Art. 2A and that,
therefore, the leases may be voidable or unenforceable in whole or part. At the very least, under applicable
contract law, those provisions of the lease that Leasecomm claims require payment regardless of performance
or fraud may be unenforceable, and customers may have other defenses, such as that the customers did not
actually accept the products or that their entry into the contract was induced by fraud or deception. They also
may have counterclaims based on the EFTA.
29. Customers rarely have the opportunity to raise any defenses. Leasecomm regularly files its collection suits
in Massachusetts, despite the fact that most of the customers reside in other states. Leasecomm has sued over
27,000 customers in the past three years in Massachusetts. Few of the customers can afford the expense of
litigation in a distant forum and most cases have ended in default judgments. Thus, customers have no real
opportunity to raise defenses to the validity of the contract.
30. Even customers who do obtain counsel are hampered by the misleading Leasecomm contracts. Courts may
take individual contracts at face value unless there is evidence that the contract is part of a pattern and practice
of fraud and deception. Given the amounts in controversy, typically under $5,000, it would be extremely difficult
for customers' lawyers to develop the evidence concerning Leasecomm's regular practice of incorrectly describing
what was financed. Making complex arguments about the inappropriate use of UCC Art. 2A by Leasecomm would
also be very costly. Finally, the potential witnesses for the customer are likely to be in the customer's local area,
distant from the Massachusetts court. Customer challenge to the distant forum clause in the Leasecomm's
contracts is similarly difficult.
31. Leasecomm aggressively enforces its judgments in the customers' local forum. With a judgment already
entered, it is almost impossible for customers to challenge Leasecomm in the subsequent judgment
enforcement actions. Had Leasecomm filed the suits in the local forum in the first instance, customers might
have been able to appear and present a defense, either with an attorney or on their own.
32. Leasecomm adds to the consumer injury by imposing high collection fees, not only for late payments, but
for every collection call it makes and letter it sends. These fees provide significant profits to Leasecomm. In
many cases, by the time Leasecomm commences collection in court, the amount sought substantially increases
the total payments due under the lease.
VIOLATIONS OF SECTION 5 OF THE FTC ACT
COUNT I
33. In numerous instances, in connection with the financing of business ventures, Leasecomm represents,
expressly or by implication, directly or indirectly, that the finance contract the customer is entering into with
Leasecomm finances all or a substantial portion of the customer's purchase of the business venture.
34. In truth and in fact, in most or all cases the finance contract, by its terms, finances only discrete equipment
or services associated with the business venture, such as a credit card swiping terminal or a virtual terminal.
35. Therefore, the representations set forth in Paragraph 33 above are false or misleading and constitute
deceptive acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
COUNT II
36. In numerous instances, in connection with the financing of business ventures, Leasecomm represents,
expressly or by implication, directly or indirectly, that it is financing the customer's purchase of a business
venture.
37. Leasecomm fails to disclose:
a. That the financing agreement is with Leasecomm and not with the business venture vendor.
b. That the financing agreement purports to make the obligation to pay Leasecomm absolute and
unrelated to the terms, conditions, or performance of any other agreement, between the customer and
the business venture vendor, and that this agreement may be unenforceable under applicable contract
law.
c. That the obligation to pay Leasecomm in full is based entirely upon acceptance of a credit card swiping
machine or virtual terminal.
d. That Leasecomm's contract requires or has the effect of requiring that customers waive all defenses
that they might have, including, but not limited to, fraud in the inducement of the contract, and that this
provision may be unenforceable under applicable contract law.
e. That any disputes concerning the financing agreement will be resolved in a forum distant from the
customer's place of residence.
38. These facts would be material to consumers in their purchase or use of the product. The failure to disclose
these facts, in light of the representation made in Paragraph 36 above is a deceptive in violation of Section 5(a)
of the FTC Act, 15 U.S.C. § 45(a).
COUNT III
39. In numerous instances in connection with the financing of business ventures, Leasecomm represents,
expressly or by implication, directly or indirectly, that customers have waived all defenses, or are precluded from
raising any defenses or counterclaims, including defenses of fraud in the inducement or that material provisions
of the financing contract are unenforceable.
40. In truth and in fact, in numerous instances, customers have and can raise defenses and counterclaims,
including defenses of fraud in the inducement or that material provisions of the financing contract are
unenforceable.
41. Therefore, the representations set forth in Paragraph 39 are false or misleading and constitute deceptive
acts or practices in violation of Section 5(a) of the FTC Act, 15 U.S.C. § 45(a).
COUNT IV
42. In numerous instances, in connection with the financing of business ventures, Leasecomm's practices of
including in its finance contracts provisions authorizing it to file lawsuits in venues other than the customer's
place of residence or the location where the customer executed the contract, and of filing lawsuits under finance
contracts in venues other than the customer's place of residence or the location where the customer executed
the contract, are likely to cause substantial injury that cannot be reasonably avoided, and are not outweighed by
countervailing benefits to consumers or competition.
43. Therefore, Leasecomm's practices, as alleged in paragraph 42 above, are unfair and violate Section 5(a) of
the FTC Act, 15 U.S.C. § 45(a).
COUNT V
44. In the course of providing financing to consumers, defendants have regularly conditioned the extension of
credit on the consumers signing a contract that includes compulsory electronic funds transfers from accounts
established primarily for personal, family, or household purposes, in violation of the EFTA, 15 U.S.C. § 1693k,
and Reg. E, 12 C.F.R. § 205.10 (e).
45. Pursuant to the EFTA, 15 U.S.C. § 1693o(c), every violation of the EFTA and Reg. E constitutes a violation of
the FTC Act.
46. By engaging in violations of the EFTA and Reg. E as alleged in paragraph 44 above, defendants have
engaged in violations of the FTC Act.
CONSUMER INJURY
47. Consumers throughout the United States have suffered substantial monetary loss as a result of defendants'
unlawful acts or practices. In addition, defendants have been unjustly enriched as a result of their unlawful
practices. Absent injunctive relief by this Court, defendants are likely to continue to injure consumers and to
harm the public interest.
THIS COURT'S POWER TO GRANT RELIEF
48. Section 13(b) of the FTC Act, 15 U.S.C. § 53(b), empowers the Court to grant injunctive and other ancillary
relief, including consumer redress, reformation or rescission of contracts, and cancellation of purported debts, to
prevent and remedy violations of any provision of law enforced by the Commission.
49. The Court, in the exercise of its equitable jurisdiction, may award other ancillary relief to remedy injury
caused by defendants' violations.
PRAYER FOR RELIEF
Plaintiff requests that the Court, as authorized by Sections 13(b) and 19 of the FTC Act, 15 U.S.C. §§ 53(b) and
57b, and pursuant to its own equitable powers:
1. Enter judgment against defendants and in favor of the Commission for each violation alleged in this
complaint.
2. Permanently enjoin and restrain defendants from violating the FTC Act, the EFTA, and Reg. E.
3. Award such relief as the Court finds necessary to redress injury to consumers resulting from the
defendants' violations of the FTC Act and the EFTA, including but not limited to, reformation or rescission
of contracts, and the cancellation of purported debts.
4. Award plaintiff the costs of bringing this action, as well as such other and additional equitable relief as
the Court may determine to be just and proper.
Respectfully submitted,
Dated: May 22, 2003
WILLIAM E. KOVACIC
General Counsel
RANDALL H. BROOK
ROBERT J. SCHROEDER
Attorneys for the
Federal Trade Commission
915 2nd Avenue, Ste. 2896
Seattle, WA 98174
206.220.4487 (Brook)
206.220.4477 (Schroeder)
206.220.6366 (fax)
You can read the final settlementt at http://www.ftc.gov/os/2003/05/leasecommstip.htm. Or here:
UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
FEDERAL TRADE COMMISSION,
Plaintiff,
v.
LEASECOMM CORPORATION and
MICROFINANCIAL INCORPORATED, Defendants
CIVIL ACTION NO.
STIPULATED FINAL JUDGMENT AND ORDER
Plaintiff, the Federal Trade Commission ("FTC" or "Commission"), filed its complaint for a permanent injunction
and other relief pursuant to Sections 13(b) and 19 of the Federal Trade Commission Act ("FTC Act"), 15 U.S.C.
§§ 53(b) and 57b, and the Electronic Funds Transfer Act ("EFTA"), 15 U.S.C. § 1693. The Commission and
defendants, Leasecomm Corporation and MicroFinancial Incorporated, have conferred through counsel and
agreed to settlement of this action without adjudication of any issue of law or fact herein. This Order resolves all
matters arising from the allegations in the complaint. The Commission and defendants consent to entry of this
Stipulated Final Judgment and Order ("Order").
THEREFORE, the Commission and defendants, having requested the Court to enter this Order, it is ORDERED,
ADJUDGED, AND DECREED as follows:
FINDINGS
1. This Court has jurisdiction over the subject matter of this case and jurisdiction over the defendants. Venue in
this district is proper.
2. The complaint states a claim upon which relief may be granted against defendants under Sections 5(a),
13(b), and 19 of the FTC Act, 15 U.S.C. §§ 45(a), 53(b), and 57b, and under the EFTA, 15 U.S.C. § 1693.
3. The activities of defendants described in the complaint are in or affecting commerce, as defined in Section 4
of the FTC Act, 15 U.S.C. § 44.
4. Entry of this Order is in the public interest.
5. Entry of this Order shall not constitute an admission or finding of liability by defendants or that any defendant
has engaged in violations of the FTC Act or any other law.
6. The defendants have waived all rights to seek judicial review or otherwise challenge or contest the validity of
this Order.
7. Each party shall bear its own costs and attorneys' fees.
8. Pursuant to Federal Rule of Civil Procedure 65(d), the provisions of this Order are binding upon defendants,
and their officers, agents, servants, employees, and all other persons or entities in active concert or
participation with them, who receive actual notice of this Order by personal service or otherwise.
ORDER
Definitions
For purposes of this Order, the following definitions shall apply:
1. "Business venture" includes any written or oral business arrangement, however denominated, that:
a. is covered by the FTC's Franchise and Business Opportunity Rule; or
b. is a purported profit making venture (e.g., multilevel marketing programs, pyramid schemes, buyers'
clubs, coupon clipping programs, investment opportunities, etc.), regardless of how participation in the
venture is characterized (e.g., as investors, members, donors, etc.), seminar, or promotion that seeks
to induce customers to make money through business or investment, or a similar intangible item.
2. "Clearly and prominently" means:
a. in a printed document or package of documents, the disclosures will be in a type size and location
sufficiently noticeable for an ordinary customer to read and comprehend, in print that contrasts with the
background against which it appears; and.
b. in a verbal sales presentation, including promotional seminars, the disclosures will be provided in
verbal form during any part of the sales presentation that discusses the financing.
3. "Customer" is any natural person who is individually liable to pay one or more defendants for financing,
either directly or indirectly, e.g., as a cosignor, guarantor, proprietor, or a signatory general partner.
4. "Defendants" means Leasecomm Corporation and MicroFinancial Incorporated, and their divisions,
subsidiaries, successors, and assigns.
5. "Financing" or "financing contract" means any financing arrangement, whether styled as a contract, lease, or
otherwise. For purposes of this Order, the term "financing" includes any debt collection activities related to the
financing.
6. "Predominant purpose" means the purpose of the financing as represented to the customer by the dealer or
vendor or as evidenced by distribution of proceeds.
7. "Dealer" or "Vendor " means any person or entity who, directly or indirectly, arranges for a customer to apply
for defendants' financing or provides defendants' financing documents to customers.
8. "SBI product lines" means virtual terminals and various other software, software licenses, and combinations
of products that are financed, and referred to internally by Leasecomm, as: INTERNET CONSULTING PKG,
COMBOV 3, CR COMBO, CR COMBOE, CR COMBOS, CR COMBOW, CR CRD 3 30, CR CRD 30, CR VTERM, CR
VTERM 30, CR VTERM3 30, INTERNET TBX, SBI COMBOV, SBI CRD TERM, SBI VTERM, SOFTWARE, WEB SITE.
9. "SBI judgments" means Leasecomm's uncollected judgments for the SBI product lines.
10. "SBI suits" means all pre-judgment, civil collection actions currently pending in court in which Leasecomm or
an assignee of Leasecomm is the plaintiff and the product purportedly leased is in an SBI product line.
11. "Virtual terminal" means a point of sale (POS) authorization system which includes any intangible products,
rights to access or use services, software, and licenses which enable customers to process credit card
transactions or account debits on-line or through the Internet over a computer.
PROHIBITIONS ON MISREPRESENTATIONS AND REQUIRED DISCLOSURES
I. IT IS ORDERED that defendants and their agents, employees, officers, attorneys, and all other persons or
entities directly or indirectly under their control or under common control with them, and those persons in active
concert or participation with defendants who receive actual notice of this Order by personal service or otherwise,
in connection with any financing offered or provided to customers, are permanently restrained and enjoined from
making any material misrepresentations, directly or indirectly, including:
A. Misrepresenting the nature, terms, or predominant purpose of the financing.
B. Misrepresenting that the customers have waived any defenses, or are precluded from raising defenses
or counterclaims.
II. IT IS FURTHER ORDERED that defendants, and their agents, employees, officers, attorneys, and all other
persons or entities directly or indirectly under their control or under common control with them, shall clearly and
prominently disclose, in writing and during oral sales presentations by their dealers and vendors, that the
financing contract is with Leasecomm and not with a dealer or vendor.
PROHIBITED CONTRACT PROVISIONS
III. IT IS FURTHER ORDERED that defendants, in connection with financing provided to customers, are
permanently restrained and enjoined from:
A. Including in any financing contract any provision that allows defendants to bring a collection suit in a
forum other than the county where the customer resides at the commencement of the action, or in the
county where the customer signed the contract sued upon.
B. Including in any financing contract any provision that (1) states that defendants have the right to
enforce the contract free from any defenses, offsets, or counterclaims, (2) states that the customer
waives any defense or counterclaim, or (3) states that the customer has no defenses, offsets, or
counterclaims, except to the extent that the provision is authorized by law.
C. Including in any financing contract any provision that purports to make the customer's obligation to
pay binding solely upon the customer's acceptance of a credit card swiping machine or other item of
tangible equipment, where the predominant purpose of the financing is a business venture or other
intangible item.
D. Conditioning the extension of credit to a customer on the customer's repayment by means of
preauthorized electronic fund transfers from an account established primarily for personal, family, or
household purposes, to the extent prohibited by the EFTA, 15 U.S.C. § 1693k, and Reg. E, 12 C.F.R.
§ 205.10 (e).
PROHIBITED DISTANT FORUM PRACTICES
IV. IT IS FURTHER ORDERED that, in connection with financing provided to customers:
A. Defendants are permanently restrained and enjoined from instituting collection suits against
customers in a forum other than the county where the customer resides at the commencement of the
action, or in the county where the customer signed the contract sued upon; except that this provision
shall not apply in any way to suits filed against defendants. This provision shall not preempt any rule of
law that further limits choice of forum or that requires, in actions involving real property or fixtures
attached to real property, that suit be instituted in a particular county.
B. Where defendants learn subsequent to institution of a suit that paragraph IV.A above has not been
complied with as to suits filed after the entry of the Order, they shall immediately seek to dismiss the
suit, with or without prejudice, and move to vacate any judgment entered thereunder. In lieu of
dismissal, defendants may effect a change of forum to a county permitted by the preceding paragraph,
provided that defendants give the customer notice of this action and opportunity to defend equivalent to
that which the customer would receive if a new suit were being instituted. If defendants effect a
dismissal, they may file a new suit in a forum permitted by Paragraph IV.A above. In any case where
defendants transfer a suit, they shall provide the customer with a clear, written explanation of the action
taken and, if the suit is transferred or refiled, of the customer's right to appear, answer, and defend in
the new forum.
C. Where defendants effect dismissal of a suit or vacation of a judgment pursuant to paragraph IV.B
above, they shall give effective notice of the dismissal or vacation to the affected customer and to each
consumer reporting agency, as that term is defined in the Fair Credit Reporting Act, 15 U.S.C. § 603, or
business credit reporting agency, that defendants have informed of the suit or have reason to know
regularly records defendants suits or judgments in its files. Effective notice is notice given in the manner
ordinarily provided by defendants reasonably sufficient to remove or correct any negative effect on the
customer's credit rating that may exist due to the original reporting of the judgment or suit. Additionally,
defendants shall furnish the notice to any other person or organization upon request of the customer.
REDRESS
V. IT IS FURTHER ORDERED that:
A. In connection with collections on financing to customers, defendants shall cease collecting on any
outstanding court judgments where the financing involved virtual terminals or the predominant purpose
of the financing was for business ventures. Defendants shall be deemed in compliance with the preceding
sentence if they promptly cease collections on any outstanding SBI judgments and thereafter, for a
period of one year after entry of this Order, cease collections on any other outstanding judgment where
the customer demonstrates that the predominant purpose of the financing was for a business venture.
This cessation of collections shall include, but is not limited to, directing all third parties engaged in debt
collection (e.g., debt collectors and debt collection attorneys) to cease immediately all collection
activities; furnishing credit information to the three credit reporting agencies to whom the defendants
report to show the applicable account no longer has an outstanding balance; returning all monies
received from customers after the effective date of this Order; filing in the court where the initial
judgment was entered a Satisfaction of Judgment; and sending a copy of the Satisfaction of Judgment to
each affected customer or its attorney of record along with the form shown in Attachment A to this Order.
Defendants shall provide the FTC with a computer readable list of the affected customers, including
names, addresses, account numbers, product(s) financed, amount outstanding at the time of entry of
this Order, and, whenever available in Leasecomm's records, the location of the court in which the
judgment was entered and the date of the judgment.
B. Defendants shall not take any action to enforce any contract provision that would have violated
paragraph III.B if it had been used after entry of this Order.
C. Within 30 days after entry of this Order, defendants shall move the appropriate court to:
1. Dismiss, with or without prejudice, any SBI suit pending in a forum that would have violated
paragraph IV.A if the suit were filed after entry of this Order. In lieu of dismissal, defendants may
effect a change of forum to a forum permitted by this Order, provided that defendants give the
customer notice of this action and opportunity to defend equivalent to that which the customer
would receive if a new suit were being instituted.
2. Stay or continue any pre-judgment, non-SBI product line collection suits against customers
pending in a forum that would have violated paragraph IV.A if the suit were filed after entry of this
Order. Defendants shall promptly notify the customer in writing that the customer has the
opportunity to have the litigation transferred to, or dismissed without prejudice and refiled in, a
forum permitted by this Order. Defendants shall maintain the stay or continuance in effect for 50
days so that the customer has at least 45 days to reply, as set forth in the relevant portions of
Attachment B to this Order. If the customer elects to have the suit changed to a local forum,
defendants shall follow the procedure described in paragraph V.C.1 above.
D. In all cases under paragraphs V.C, defendants shall provide the customer with a clear, written
explanation of the action taken and of the customer's right to the change of forum and to appear,
answer, and defend in the new forum. If the defendants are entitled to claim any collection costs or
attorney fees, they may not charge the customer for any costs or fees associated with the initial filing or
the change of forum. If local rules require a defendant's agreement to dismissal or transfer of the suit,
then defendants shall not be obligated to dismiss or transfer the suit if, after providing the customer or
their counsel with a clear, written explanation of the customer's right to have the suit dismissed or
transferred to the new forum, the customer does not execute and return the documents required for
transfer or dismissal without prejudice. The notice shall be in the form shown in Attachment B to this
Order, with appropriate paragraphs included. A violation of paragraphs V.C-D shall render any judgment
entered in the prohibited forum as a result thereof null and void and unenforceable by the defendants or
their assigns.
E. Where defendants dismiss suits pursuant to paragraph V.C above, they shall give effective notice of
the dismissal to the affected customer and to each consumer reporting agency, as that term is defined in
the Fair Credit Reporting Act (15 U.S.C. § 603), or business credit reporting agency, that defendants have
informed of the judgment or suit or have reason to know regularly records defendants suits or judgments
in its files. Effective notice is notice given in the manner ordinarily provided by defendants to credit
reporting agencies reasonably sufficient to remove or correct any negative effect on the customer's credit
rating that may exist due to the original recording of the judgment or suit. Additionally, defendants shall
furnish the notice to any other person or organization upon request of the customer.
F. Within 30 days after entry of this Order, defendants shall provide a Customer Notice to all
pre-judgment customers (1) with financing in any SBI product line, or (2) who receive, or have received
within the six months prior to entry of this Order, any collection calls or letters from defendants or any
collection agent of defendants. The notice shall be in the form shown in Attachment B to this Order, with
appropriate paragraphs included as applicable to the particular customer. The Customer Notice above
shall be prepared by defendants and inserted into pre-paid, first class mail envelopes with a return
address designated and format approved by the FTC. Defendants shall deliver the envelopes to the FTC
or its designee, boxed and sorted appropriately for inspection and mailing. Defendants shall provide the
FTC with a computer readable list of customers to whom the notices are being sent, including names,
addresses, account numbers, product(s) financed, and indicators of the notice form and paragraph(s)
used.
G. Within 30 days after entry of this Order, where any lawsuit is pending in a forum not otherwise
prohibited by this Order but where defendants have pled or argued in any manner based on contract
language that would be inconsistent with III.B above, defendants shall cease relying upon that
argument, including filing at the first procedural opportunity, an appropriate pleading with the court that
effectively withdraws the pleading or argument.
H. Where a financing contract contains a provision for electronic funds transfers and the customer notifies
defendants that the customer's account referenced in the contract was established primarily for personal,
family, or household purposes, defendants shall allow the customer to choose an alternative means of
payment upon request of the customer. Defendants may not charge the customer for using the
alternative means of payment unless the charge is expressly authorized by the financing contract and is
permitted by the EFTA, 15 U.S.C. § 1693, and Reg. E, 12 C.F.R. § 205.
MONITORING COMPLIANCE OF DEALERS AND VENDORS
VI. IF IS FURTHER ORDERED that defendants are hereby permanently restrained and enjoined from:
A. Failing to take reasonable steps sufficient to monitor all dealers' and vendors' compliance with
paragraphs I and II of this Order. These steps shall include, at a minimum, establishing a procedure for
receiving, investigating, and responding to customer complaints, and ascertaining the number and
nature of customer complaints regarding transactions in which each dealer or vendor is involved.
B. Failing to take corrective action with respect to any dealer or vendor whom defendants determine is
not complying with this Order, which may include terminating defendants' business relationship with the
dealer or vendor.
DISTRIBUTION OF ORDER
VII. IT IS FURTHER ORDERED that, for a period of five years from the date of entry of this Order, defendants
shall:
A. Deliver a copy of this Order to all principals, officers, directors, and managers
B. Deliver a copy of this Order to all employees who collect from customers, and all employees who
respond to customer complaints or inquiries, and to all employees responsible for contacts with dealers
and vendors.
C. Deliver to all dealers and vendors a copy of those parts of this Order that include the first four pages
of this Order containing all definitions and the section entitled "Prohibitions on Misrepresentations and
Required Disclosures," and the page with the judge's signature.
D. Deliver to all assignees of financing contracts subject to section V of this Order a notice stating that a
federal court order prohibits enforcement of certain provisions of the financing contracts, if any, that
conflict with paragraphs III.A or III.B of this Order. This notice shall include the full text of paragraphs
III.A and III.B, including the section header.
E. Deliver to third party debt collectors a notice stating that distant forum collection suits and the
enforcement of certain contract language are now prohibited by federal court order, as set forth in
paragraphs I.B, III.A, and III.B.
F. Defendants shall seek to secure from each of these persons or entities described in Paragraphs
VII.A-E above a signed and dated statement acknowledging receipt of the Order or notice. Defendants
shall deliver the Order or notice to current personnel and dealers and vendors who are to receive the
Order within 30 days after the date of entry of this Order, to assignees of financing documents before
the assignment is made, to new personnel or dealers and vendors within 30 days after the person
assumes the relevant position or responsibilities or, in the case of a dealer or vendor, associates with
either of the defendants.
RECORD KEEPING
VIII. IT IS FURTHER ORDERED that, for a period of five years from the date of entry of this Order, defendants
and their agents, employees, officers, corporations, and those persons in active concert or participation with
them who receive actual notice of this Order by personal service or otherwise, are hereby restrained and
enjoined from failing to create and retain the following records:
A. As to each customer complaint concerning misrepresentation, fraud, or debt collection practices,
whether received directly or indirectly or through any third party, the records shall include, at a minimum,
to the extent available after reasonable efforts:
1. The customer's name, address, telephone number, and account number;
2. The written complaint, if any, or a summary of any verbal complaint, and the date of the
complaint;
3. The basis of the complaint, including the name of any person or entity complained of, and the
nature and result of any investigation conducted concerning any complaint;
4. Each response and the date of the response;
5. Any final resolution and the date of the resolution; and
6. In the event that no action is taken on the complaint, the reason for the inaction, or if action is
taken, the basis for taking the action.
B. As to each dealer or vendor:
1. Name, address, telephone number, and website address (if applicable); and
2. A listing of what defendants are financing and have financed.
COMPLIANCE REPORTING
IX. IT IS FURTHER ORDERED that, in order that compliance with the provisions of this Order may be monitored:
A. For a period of five years from the date of entry of this Order, defendants shall notify the Commission
of any changes in corporate structure that may affect compliance obligations arising under this Order,
including but not limited to a dissolution, assignment, sale, merger, or other action that would result in
the emergence of a successor corporation; the creation or dissolution of a subsidiary, parent, or affiliate
that engages in any acts or practices subject to this Order; the filing of a bankruptcy petition; or a
change in the corporate name or address, at least 30 days prior to the change, provided that, with
respect to any proposed change in the corporation about which defendants learn less than 30 days prior
to the date the action is to take place, defendants shall notify the Commission as soon as is practicable
after obtaining that knowledge.
B. One hundred eighty days after the date of entry of this Order, defendants shall provide a written
report to the FTC, sworn to under penalty of perjury, setting forth in detail the manner and form in which
they have complied and are complying with this Order. This report shall include, but not be limited to:
(1) Any changes required to be reported pursuant to subparagraph (A) above;
(2) A copy of each acknowledgment of receipt of this Order obtained by defendant pursuant to
paragraph VII above; and
(3) A list of persons or entities, including addresses and phone numbers, who declined to return
the acknowledgment of receipt required by paragraph VII above, and a description of the steps
defendants took in seeking the acknowledgment.
C. For the purposes of this Order, defendants shall, unless otherwise directed by the Commission's
authorized representatives, mail all written notifications or other communications to the Commission to:
Director, Northwest Region
Federal Trade Commission
915 2nd Avenue, Room 2896
Seattle, WA 98174
COMPLIANCE MONITORING
X. IT IS FURTHER ORDERED that, for the purpose of monitoring and investigating compliance with any provision
of this Order:
A. Within 30 days of receipt of written notice from a representative of the Commission, defendants shall
submit additional written reports, sworn to under penalty of perjury; produce documents for inspection
and copying; and appear for deposition.
B. In addition, the Commission is authorized to monitor compliance with this Order by all other lawful
means, including but not limited to the following:
(1) obtaining discovery from any person, without further leave of court, using the procedures
proscribed by Fed. R. Civ. P. 30, 31, 33, 34, 36, and 45;
(2) posing as customers to defendants, defendants' employees, any other entity managed or
controlled in whole or in part by defendants, and defendants' dealers and vendors, without the
necessity of identification or prior notice.
Provided that nothing in this Order shall limit the Commission's lawful use of compulsory process,
pursuant to Sections 9 and 20 of the FTC Act, 15 U.S.C. §§ 49, 57b-1, to obtain any documentary
material, tangible things, testimony, or information relevant to unfair or deceptive acts or practices in or
affecting commerce (within the meaning of 15 U.S.C. § 45(a)(1)).
C. Defendants shall permit representatives of the Commission to interview any employer, consultant,
independent contractor, representative, agent, or employee who has agreed to such an interview, relating
in any way to any conduct subject to this Order. The person interviewed may have counsel present.
ACKNOWLEDGMENT OF RECEIPT OF ORDER BY DEFENDANT
XI. IT IS FURTHER ORDERED that each defendant, within 10 days of receipt of this Order as entered by the
Court, must submit to the Commission a truthful sworn statement acknowledging receipt of this Order.
RETENTION OF JURISDICTION
XII. IT IS FURTHER ORDERED that this Court shall retain jurisdiction of this matter for purposes of construction,
modification, and enforcement of this Order.
SO ORDERED, this ______ day of __________, 2003.
UNITED STATES DISTRICT JUDGE
The parties consent to the terms and conditions of the Stipulated Permanent Injunction as set forth above and
consent to its entry.
FOR DEFENDANTS:
MICROFINANCIAL INCORPORATED
By: Richard F. Latour
President & CEO
LEASECOMM CORPORATION
By: Richard F. Latour
Exec. V.P. COO/CFO
RICHARD J. MCCARTHY, BBO # 328600
Edwards & Angell, LLP
101 Federal St.
Boston, MA 02110
617.439.4444
617.439.4170 (fax)
FOR PLAINTIFF FTC:
Dated: May 22, 2003
WILLIAM E. KOVACIC
General Counsel
RANDALL H. BROOK
ROBERT J. SCHROEDER
Attorneys for the
Federal Trade Commission
915 2nd Avenue, Ste. 2896
Seattle, WA 98174
206.220.4487 (Brook)
206.220.4477 (Schroeder)
206.220.6366 (fax)
ATTACHMENT A - NOTICE TO CUSTOMERS
(Customer's Name and address or, if applicable, Customer's Attorney's Name and Address)
Dear (Addressee):
Enclosed is a Satisfaction of Judgment which is being filed with the court in which Leasecomm obtained its initial
judgment against you. This filing concludes this legal proceeding. You may use the enclosed Satisfaction of
Judgment document to show that this debt to Leasecomm is no longer outstanding.
In addition, beginning [the date Order entered] you have no further obligations to make payments on this
judgment to Leasecomm. If you made any payments after [the date Order entered], they will be returned to
you.
This action is being taken as part of a settlement between Leasecomm Corporation and the Federal Trade
Commission, the States of Massachusetts, Florida, Illinois, Texas, North Dakota, North Carolina, Kansas and the
District Attorney's Office for Ventura County, California.
If you have any questions, contact Leasecomm at phone [number] or visit www.ftc.gov/[Leasecomm page to be
specified by FTC].
ATTACHMENT B - NOTICE TO CUSTOMERS
OFFICIAL NOTICE OF IMPORTANT CHANGES IN LEASECOMM CONTRACTS
From the Federal Trade Commission, the States of Massachusetts, Florida, Illinois,
Texas, North Dakota, North Carolina, Kansas, and Ventura County, California.
And from the Leasecomm Corporation
(Customer's Name and address or, if applicable, Customer's Attorney's Name and Address)
Dear (Addressee):
Leasecomm Corporation has agreed to settle proposed cases against it by various government agencies by
making certain changes in its contracts and debt collection procedures. These changes may directly benefit you if
there is a payment dispute between you and Leasecomm.
1. Leasecomm's existing contract says that it may sue you in Massachusetts if you fail to pay on your contract,
regardless of where you live. Leasecomm has agreed to disregard this provision if it files a suit against you. If
you dispute your Leasecomm debt and Leasecomm sues you, it will only file the suit in the county where you
live or where you signed the contract.
[Alternate ¶ 1 if distant forum, SBI suit pending]
1. Leasecomm's existing contract says that it may sue you in Massachusetts, regardless of where you live.
Nonetheless, Leasecomm has agreed to dismiss or transfer collection suits like the one against you to a court in
your county. Leasecomm will ask the court's permission to transfer the suit to your county, or to dismiss the suit
without prejudice. "Without prejudice" means that Leasecomm may refile the suit in your county.
[Add next paragraph if required by local court rules]
You should receive, from Leasecomm or the court, copies of all legal papers relating to its request to transfer
the suit or to dismiss it without prejudice. If you do not complete the papers necessary to show you agree to
transfer the suit or dismiss it without prejudice, Leasecomm may proceed with the suit in Massachusetts.
Leasecomm may not ask that you agree to anything in connection with the transfer or dismissal other than
transferring or dismissing the suit. Nor may Leasecomm charge you any fees or costs because of the transfer or
dismissal.
[Alternate ¶ 1 for distant forum, non-SBI suit pending]
1. Leasecomm's existing contract says that it may sue you in Massachusetts, regardless of where you live.
Nonetheless, Leasecomm has agreed to offer to transfer collection suits like the one against you to a court in
your county. The lawsuit against you is being suspended to give you time to reply to this offer.
If you want to have the suit heard in a local court, Leasecomm will ask the current court's permission to transfer
the suit to your county, or to dismiss the suit without prejudice. "Without prejudice" means that Leasecomm may
refile the suit in your county. Leasecomm may not ask that you agree to anything in connection with the transfer
or dismissal other than transferring or dismissing the suit for refiling in your county. Leasecomm may not charge
you any fees or costs because of the transfer or dismissal.
If you wish to have the suit transferred, you must return the enclosed request form within45 days. If
Leasecomm does not receive the attached form signed by you within that 45-day period, Leasecomm will
resume the pending action in Massachusetts. You will no longer have an opportunity to transfer the case or have
the case dismissed without prejudice to refiling in your local county. Because it is important that Leasecomm
receive your response within 45 days, Leasecomm strongly recommends that if you decide to return the
attached form, you send it by certified mail, return receipt requested, or some other form of mailing that would
provide you with a record of Leasecomm's receipt of the documents.
[Add next paragraph if required by local court rules]
If you request the suit be transferred, you should receive, from Leasecomm or the court, copies of all legal
papers relating to its request to transfer the suit or to dismiss it without prejudice. If you do not complete the
papers necessary to show you agree to transfer the suit or dismiss it without prejudice, Leasecomm may
proceed with the suit in Massachusetts.
2. Leasecomm's contract with you may state that you recognize Leasecomm's "right to enforce the lease free
from any defenses offsets or counterclaims". Leasecomm has agreed not to enforce this provision. This means
that no debt collector or lawsuit may say that you have given up all your defenses or claims. You may still want
to ask a lawyer for advice about whether you do have defenses or claims.
3. Your contract with Leasecomm may direct that payments be automatically deducted from a bank account. If
you are having payments deducted from a personal bank account, please let Leasecomm know whether you
want to stop using automatic payments and how you want to make payments in the future. Leasecomm is
required to make this change if the automatic deductions come from a personal account, but not if they come
from a business account. There is no charge for making this change. [If specified in by the contract, the following
may be used: As stated in your contract, there is an additional charge of $___ for payments not deducted
automatically from your bank account or credit/debit card.]
For further information, contact Leasecomm at phone 206-220-6350 or visit www.ftc.gov/.
The FTC put up a Web site about Leasecomm at www.ftc,gov/ro/leasecomm/index.htm. See also http://www.geocities.com/leasescamm.