Castulo Lacayo works hard at his Nicaraguan convenience store called Nicaraguitas Tortillas. His wife and son work alongside him. To grow their small business, the family needed to process credit cards. In 2007, they rented a machine from a company called Northern Leasing Systems. He signed a 48-month lease of the credit card machine.
But two years into the non-cancelable contract, Lacayo said his rate when up from $.07 to $.75 per transaction. Those fees were in addition to the nearly $200 dollars a month for renting the machine.
His attorney, Christine Martin Solis with Arias & Martin Solis, calls it a bad deal overall.
“This is a device that would cost between $200 and $400 dollars if you would buy it on the market,” said Solis. “Under this contract, clients would pay between $8000 to $9000 for a machine that’s never theirs that they would have to give back.
Lacayo says when the company wouldn’t let him out of the contract, he stopped using the machine and changed his bank account.
But that wasn’t the end.
“They came after me. They sent me to collections,” Lacayo said. “A lot of letters to my house.”
The collection letters went to his house because the contract he signed included a personal guarantee, allowing the company to go after him.
“For me, it’s a scam,” he said. “It’s totally a rip-off.”
The New York State Attorney General’s office agrees. The office has received so many complaints against Manhattan-based Northern Leasing Systems that it’s filed a lawsuit alleging the company lied to small business owners. The suit alleges that in some cases, the company forged signatures and engaged in harassing and fraudulent collection practices to get money.
“I think it’s a massive scam,” said Jane Azia, Chief of the New York State Attorney General Consumer Fraud unit. “These leases were procured by misrepresentation and fraud. They lied to consumers about the money they would save. They lied to consumers that they can cancel their leases at any time and they overcharged enormously.”
The company didn’t answer our requests for comment, but in court filings it has denied the Attorney General’s allegations.
In the last year, NBC Investigators across the country have documented cases like Lacayo’s.
There’s a school owner from New York who says her credit was damaged by Northern Leasing. She says she got a letter in the mail saying there was a judgment against her.
And a beauty shop owner from Washington DC says she didn’t even know she had been sued by the company because everything happens in New York.
“Most of the people, 96 percent live elsewhere, in California, Texas, Florida,” Azia said. “They didn’t have the means to come to New York and they didn’t have the means to hire an attorney.”
Between 2010 and 2015, Northern Leasing filed against small businesses to collect in over 30,000 cases. Nearly 19,000 resulted in what’s called a default judgment often when someone doesn’t show up to defend themselves in court.
In Lacayo’s case, his attorney managed to negotiate his $6900 balance down to $5800. He recognizes it’s not a big victory, but a lesson he will never forget.
“They don’t care about you,” he said. “So you have to read the small letters.”
In 2012, Northern Leasing Systems settled a civil lawsuit and refunded $3.6 million after being accused of stealing money from customers’ bank accounts. A New York City attorney representing hundreds of other clients is also taking the company to federal court alleging a racketeering scheme. In a previous statement, Northern Leasing said that it “prides itself on the fairness of its business practices and open dialogue with lessees.”