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The May Department Stores Company has agreed to make full restitution, totaling more than $15 million, to consumers they persuaded to “reaffirm” their credit card debts after filing bankruptcy.
The May Department Stores Company, one of the largest department store operators in the country, operates many well-known stores, including Lord & Taylor, Hecht’s Strawbridge’s, Foleys, Robinsons-May, Kaufmann’s, Filene’s, Famous Barr, L.S. Ayres and Meier & Frank
The FTC settlement agreement, developed with help of the Office of the United States Bankruptcy Trustee and many state Attorneys General, states that May regularly sought out consumers who had filed for bankruptcy protection to persuade them to “reaffirm” credit account debts, and falsely represented that these “reaffirmation agreements” would be filed with the bankruptcy courts, as required by law. In fact, the FTC reports, in many cases May did not file the “reaffirmation agreements” or the bankruptcy courts did not approve the agreements, and they were consequently not legally binding on consumers.
Reaffirmation agreements are not illegal. However, the U.S. Bankruptcy Code requires that they are filed with the bankruptcy courts, and in the case of debtors not represented by legal counsel, the agreements must be approved by the court. If not filed or approved, the agreements are unenforceable, and the underlying debts are legally discharged in bankruptcy.
Copies of the complaint and proposed settlement are available from the FTC’s web site at www.ftc.gov; by writing the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Ave., N.W., Washington, D.C. 20580; or by calling 202-FTC-HELP (202-382-4357).
There will be a public comment period of 60 days, after which the Commission will make its final decision. More information on this process is available by calling 202-326-3627.
