When Rick Northrop, the owner of Northrop Video of White City, Ore., signed a contract with Credit Card Center in September to lease an NCR Corp. automated teller machine, he thought he was getting a great deal.

The ATM reseller guaranteed him $240 a month of advertising revenue against the $254 monthly lease for the life of the five-year contract. He also was to get 85% of the transaction fees. “The maximum this machine would ever cost me is $14 a month,” he remembered thinking.

But the next month his check from Credit Card Center bounced, and he became yet another dissatisfied customer of the Philadelphia company, which has since caused major financial problems for two of its suppliers, NCR and Tidel Technologies Inc.

On top of the $42 million NCR says Credit Card Center owes it and the $26.7 million Tidel says it is owed, the independent sales organization — one of the nation’s largest — has been defaulting on numerous merchant contracts, according to interviews with merchants, and is likely to face multiple lawsuits or a class action, say attorneys for the merchants.

In his frustration, Mr. Northrop, who pays rent on the machine but has received none of the money promised by Credit Card Center, has hung an “out-of-service” sign on his ATM. He is not getting the advertising payments, and he asserts that the company has not made good on its promise to pick up the cost of the ATM’s insurance.

“To date, I still have no proof that this ATM is insured,” he said.

When Mr. Northrop started asking questions of other retailers, he discovered that numerous merchants in his county, Jackson, and around the country had had similar experiences. He has since organized 14 local merchants and contacted a lawyer.

“Our objective is the removal of the ATMs and to dissolve both agreements with Credit Card Center and the lease companies,” he said.

He also discovered that he actually is leasing his machine from Advanta Leasing, a subsidiary of Advanta Corp. of Spring House, Pa. — an arrangement, he said, that was not disclosed to him when he signed his deal with Credit Card Center.

Mr. Northrop said his attorney has also contracted the Oregon attorney general’s office, with an eye toward starting a class action against Credit Card Center — or at least “putting pressure” on it to honor its contracts. Elsewhere, merchants who have had similar experiences with the company have also called lawyers and attorneys general.

Credit Card Center has not declared bankruptcy and insists it will pay all its obligations. Andrew Kallok, the company president, did not return calls, but his lawyer, Scott L. Vernick, said it has recently obtained funding, though he would not say how much or from whom.

“The proceeds of that new funding have begun to flow to Credit Card Center,” said Mr. Vernick, a partner in the Philadelphia firm of Fox, Rothchild, O’Brien & Frankel. “That puts us in a position to honor our obligations, particularly to merchants.” Some merchants have been paid recently out of those funds, he said.

But some merchants say they are skeptical. “They’re talking about the money — I want to know where’s my money?” said Tim Wallace, manager of the Daily Market in Lewes, Del. Mr. Wallace, who also has been organizing merchants who dealt with Credit Card Center, said the ISO owes him nearly $1,000.

“It’s the same story, every week or two,” Mr. Northrop said. “ ‘Next week we’ll have things straightened out, and you’ll have it by such-and-such time,’ and the dates come and go, and we never receive any money. No one is getting paid.”

Credit Card Center was opened in early 1996 and grew rapidly into the biggest reseller of ATMs in the country, largely by cutting deals with merchants like Mr. Northrop. According to the company, in its first four years it went from a two-person operation to one that employed more than 700. It reported $140 million of revenue for last year and has cited its rapid growth as a reason for its woes.

Pete Fagerlin, vice president of QL Capital Inc., which still arranges funding for merchants that lease ATMs from Credit Card Center, said another problem was Advanta’s decision in January to get out of the equipment leasing business. “That precipitated it,” he said. “Credit Card Center had a commitment from Advanta to fund them through the first quarter. They installed the equipment in the merchants’ stores, and Advanta said, ‘No, we’re not going to fund you.’”

Mr. Fagerlin said his company has never had any problem with the ISO. “We have a two-year track record with Credit Card Center. They’ve lived up to their agreements with us.”

Catherine Reid, a spokeswoman for Advanta, said the decision to quit the equipment leasing business was made “after the evaluation of a number of strategic alternatives and related to all types of equipment leases, not just ATMs.” She said ATM leasing is about 5% of the company’s portfolio.

Advanta has sued Credit Card Center, but Ms. Reid would not comment on it. Mr. Vernick said Credit Card Center is planning a counterclaim.

But another source close to the ISO, who asked not to be named, said that Advanta’s pulling out of deals with the reseller had nothing to do with its troubles. Credit Card Center works with numerous financing companies, the source said, and “Advanta only approved the creme de la creme of their leases.”

Mr. Fagerlin linked Credit Card Center’s troubles to another factor, an exclusive-supplier deal with NCR under which the ISO had to buy a certain number of machines but has found itself with a full warehouse. “They’ve offered to ship them back to Tidel [a former supplier] and NCR, but they, of course, don’t want them back because they’d have to restate their financials,” he said.


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