Other LanguagesSEATTLE -- The Attorney General and the Region 18 United States Trustee announced that Federated Department Stores, Inc., owners of The Bon Marche, have agreed to pay approximately $7.5 million as part of a multi-state settlement for improper debt collection practices.
A consumer protection investigation, led by Washington state, confirmed that Federated stores enticed customers who filed Chapter 7 bankruptcy to sign a contract agreeing to repay their debt rather than have it dismissed in bankruptcy. Federated then failed to file those agreements with the Bankruptcy Court as required by law. The practice has been going on for at least five years.
This investigation followed a similar case last year involving a $ 365 million national settlement with Sears, Roebuck and Co. for the same practices.
Federated operates retail stores nationally under the names of The Bon Marche, Bloomingdales, Burdines, Lazarus, Rich's, Goldsmith, Macy's East, Macy's West, and Sterns. The company will pay approximately $ 5 million to customers; forgive approximately $ 6.9 million in improperly obtained debt; pay $2.5 million to the states for the costs of investigation and penalties; and contribute $240,000 to a special education fund.
Washington state's share of the settlement will be approximately $1.6 million, with $1 million going as restitution to over 3,100 customers. The state will receive $450,000 in civil penalties and $150,000 for legal costs and fees.
"These customers signed these agreements in order to get additional credit or save their goods from repossession," said Attorney General Christine Gregoire.
"Although the debt had been legally discharged by the bankruptcy court, Federated stores led consumers to believe they still had to pay back the debt."
Under the settlement, any affected customers identified by Federated or through the claims process, will:
- Have all their "reaffirmed" debt stricken and Federated will waive any rights to repossess the merchandise;
- Be reimbursed or receive credit for finance charges, and penalties charged by Federated;
- Be reimbursed for any money paid on the reaffirmed debt plus 10% interest;
- Be eligible to receive a pro rata payment based upon the amount of payments they made on an unlawful debt.
A reaffirmation agreement is a written contract under which an individual in a Chapter 7 bankruptcy agrees to repay a debt that would otherwise be discharged in the bankruptcy. These agreements are supposed to be voluntary and to be enforceable must be filed with or in certain circumstances, approved by the bankruptcy court.
According to Gregoire, Federated cooperated fully in the investigation and took steps voluntarily last summer to identify and credit the accounts of customers for amounts improperly collected.
Other states participating in this agreement include: Alabama, California, Florida, Georgia, Idaho, Illinois, Indiana, Kentucky, Massachusetts, New Hampshire, New Jersey, New Mexico, Nevada, New York, Ohio, Oregon, Pennsylvania, South Carolina and Tennessee.
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