Federated Department Stores Inc. agreed Tuesday to a $14.64 million settlement of government charges that it improperly pressured bankrupt consumers to repay credit card debts.
The deal resolves charges by the Justice Department and attorneys general in 20 states, including California, Illinois, and New York.
They accused the retailer of pressuring customers to reaffirm debts that they were entitled to eliminate in Chapter 7 bankruptcy. The company then failed to record these reaffirmation agreements with the bankruptcy court.
The firm must pay $5 million in compensation, forgive $6.9 million in improperly reaffirmed debt, pay $2.5 million to the states, and contribute $240,000 to an education fund.
"The settlement will clean up prior illegal practices and assure that they don't reoccur," said Jan Ostrovsky, a U.S. bankruptcy trustee involved in the investigation.
Federated operates 13 department stories, including R.H. Macy and Co. and Bloomingdales. It began voluntarily reimbursing affected consumer this summer shortly after the government brought similar charges against Sears, Roebuck and Co.
"We are pleased that this issue has been effectively resolved through a multistate agreement that builds on a program of voluntary reimbursements already completed by the company," said Dennis J. Broderick, Federated's general counsel.
- Jaret Seiberg