Northern Leasing and Equipment Lease Litigation

Also called Northern Leasing Systems, non-cancellable equipment lease, POS micro-lease

The non-cancellable terminal lease model and the New York Attorney General case that produced a restitution award exceeding 680 million dollars.

What it is

The equipment lease is the most durable reputational injury in merchant services. The model works like this: a merchant is placed on a multi-year, non-cancellable lease for a card terminal, often 48 months, at a monthly payment that totals many times the hardware's purchase price. The lease is a separate contract from the merchant agreement, frequently with a third-party leasing company, so cancelling processing does not cancel the lease. Personal guaranties are typical. Northern Leasing Systems is the case that defined the category. The New York Attorney General sued the company in April 2016 over deceptive equipment leases. In June 2020 the court ordered rescission of all leases and vacated default judgments. In September 2023 the court awarded over 680 million dollars in restitution against Northern Leasing, plus 9.3 million dollars against its attorneys. As of the Attorney General's posting, none of that had been collected. The operative lesson for a merchant is structural rather than historical. A terminal that costs a few hundred dollars to buy should not be leased for four years. If equipment is being leased rather than sold, ask for the total of payments over the full term and compare it to the purchase price of the same device. Sell or place equipment outright, or bundle it into a cancellable software subscription. That is the standard a transparency-first provider should hold, and it is the standard a merchant should demand.

Why it matters to your business

If you are being placed on any equipment lease, ask two questions before signing: what is the total of all payments over the full term, and what does this device cost to buy outright. If the first number is several times the second, you have your answer. Then check whether the lease is cancellable, whether it is with the same company as your processing, and whether you are personally guaranteeing it. In the classic structure the answers are no, no and yes. This is education, not legal advice. If you are already in a lease you believe was misrepresented, that is a conversation for an attorney, not for a payments salesperson.

Where it gets contested

The industry defense has always been that leases let a merchant preserve capital and include service and replacement. In some contexts that is a real argument. It does not survive the math on a low-cost terminal at a four-year non-cancellable term with a personal guaranty attached. The more damaging structural feature is separation. Because the lease sits with a different company, the merchant who switches processors, or whose business closes, remains on the hook, and enforcement is pursued against the individual guarantor. That separation is what allowed default judgments at scale, which is precisely what the New York court vacated. What remains unresolved is collection. A very large restitution award that has not been collected does not make merchants whole, and it is a reminder that the practical protection is refusing the lease in the first place, not litigating afterwards.

How to check it yourself

Take your monthly lease payment, multiply by the number of months remaining in the term, and search online for the purchase price of the same terminal model. Put those two numbers next to each other before you sign anything else.

Receipts

Claims above that are checkable, with where to check them. Published so you do not have to take anyone's word for it.

The New York Attorney General sued Northern Leasing Systems in April 2016; the court ordered rescission of all leases and vacated default judgments in June 2020; in September 2023 it awarded over 680 million dollars in restitution plus 9.3 million against its attorneys, none collected as of the posting
ag.ny.gov ↗
Non-cancellable multi-year leases on inexpensive terminals are identified as the industry's most damaging practice for local operators
merchantmaverick.com ↗