Md. suspends license of CashPoint pay service

Company owes creditors, which are forcing it into bankruptcy

April 28, 2004|By Eileen Ambrose | Eileen Ambrose,SUN STAFF

Maryland regulators announced yesterday that they suspended the license of CashPoint Network Services Inc., a New York-based payment service being forced into bankruptcy by creditors and facing suspensions by other states.

CashPoint, which transmits consumers' payments to utilities and other companies, operates nine locations in check-cashing and convenience stores in Maryland, including sites in Frederick, Cumberland and several Washington suburbs.

In an annual report submitted to Maryland regulators, the privately held company said it had transmitted $1.7 billion in payments through 18.5 million transactions nationwide in 2002. That includes $433,000 in 5,000 transactions for Marylanders.

Maryland regulators did not receive complaints from consumers or businesses, but suspended the company's license Friday out of concern that CashPoint appeared to be insolvent, said Charles Turnbaugh, the state's commissioner of Financial Regulation.

The license is suspended for at least 30 days, and the suspension could become permanent pending the outcome of an investigation.

CashPoint officials could not be reached for comment and the company's lawyers did not return phone calls.

A series of actions have been taken against the company in the past week.

On Wednesday, New York suspended CashPoint's license for 30 days, while the state investigated the company's finances. CashPoint failed to pay about $13 million to a New York bank and owes up to $25 million to other creditors, New York regulators said.

"The New York authorities and the FBI are investigating how this money came to be missing," Turnbaugh said.

On Thursday, CashPoint's creditors filed an involuntary petition under Chapter 7 of the U.S. bankruptcy code, claiming the company owed them about $28.8 million. Chapter 7 permits assets to be liquidated.

The largest creditors are Consolidated Edison Company of New York, which claims it is owed $23 million, followed by Time Warner Cable of New York City, with a $2.5 million claim. The company has 20 days to respond.

And on Friday, Pennsylvania suspended CashPoint's license.

This week, Rhode Island, Maine and Connecticut are expected to take similar action against CashPoint, Maryland officials said.

Regulators advise CashPoint customers to make sure payments to utilities and other companies have been made and to keep records of the transactions.

Marylanders with questions or complaints can contact regulators at 1-888-784-0136.

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