GE Capital Agrees to NorVergence Settlement
Eight attorneys general have crafted a settlement agreement that could
provide millions of dollars in debt forgiveness to small businesses in
several states now on the hook for payments to third-party leasing
companies after an allegedly fraudulent telecommunications company
The Attorneys General of Connecticut, Georgia, Illinois, Maryland,
North Carolina, Pennsylvania, South Dakota, and Washington, D.C., have
reached an agreement with General Electric Capital Corporation (GE
Capital) in connection with its collection agreements on behalf of
Under the terms of the agreement, affected consumers may choose to
participate or decline to participate. If all affected consumers in
the six states and D.C. accept the deal, GE Capital will be writing
off more than $2.89 million in debt for 216 small businesses.
"Deceptive sales pitches lured hundreds of Illinois small business
customers into signing telecommunication service agreements with
NorVergence. But when the service suddenly ceased, the collection
agency hassles began," Illinois Attorney General Lisa Madigan said.
"With this agreement, GE Capital is agreeing to end a nightmare that
has haunted many small businesses as they try to regain telecommuni-
cations service and overcome the financial hurdles caused by
Under the settlement agreement, GE Capital -- which entered into
direct contracts with NorVergence customers or, through other
third-party companies, bought out lease agreements between NorVergence
and its customers -- has agreed to write off or forgive $2,891,699
million it claimed to be owed by 216 NorVergence customers from the
states represented in the agreement, many of whom had in the past
year 'stalled', or refused to make any payments at all, daring GE
Capital to 'sue them', which it did not do.
This amount constitutes 85% of the debt owed to GE Capital from the
period beginning on July 15, 2004, the approximate date that
NorVergence ceased providing any services. Consumers who have made
payments to GE Capital since July 15, 2004, will receive credit for
those payments toward their remaining balance.
While GE Capital denies any wrongdoing, it has agreed to forgive the
$2.89 million of the debt it claims consumers owe on rental agreements
and provide up to two years for customers to pay any remaining
In November 2004, Madigan filed a lawsuit against NorVergence, and
Peter Salzano, its president. NorVergence is a telecommunications
company based in Newark, New Jersey, that set up a sales office in
Oakbrook Terrace. Madigan's lawsuit alleged the company's sales pitch
offered small businesses discounted telecommunications services
through the use of a "Matrix" box.
NorVergence claimed the device was necessary to allow a small business
to reap a 30 percent discount on its current telecommunications costs,
including long distance, DSL service, and wireless phone service. The
total cost of agreements to lease the matrix boxes ranged from
approximately $12,000 to $175,000.
Under NorVergence's alleged scheme, the company would sell its
five-year contracts to leasing companies and walk away with the
profit. When NorVergence was forced into bankruptcy in June 2004, its
customers were left without service but still responsible for the
five-year lease agreement payments to leasing companies.
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