Sears, Roebuck and Co. said it agreed to pay $178 million or more to settle a class action over the illegal collection of bankruptcy debt from its cardholders.

Sears has admitted it improperly filed repayment agreements for 30% to 65% of bankrupt debtors who have agreed to repay their debt since 1992. In all, Sears had illegally collected $412 million in reaffirmed debt.

According to the Federal Trade Commission, more than 200,000 customers were affected.

In U.S. Bankruptcy Court in Boston last Thursday, Sears proposed a $25 million fund to be distributed among wronged debtors. The settlement replaces an agreement reached April 9 to award each claimant a $100 gift certificate.

Sears will also pay $90 million to $160 million in restitution to other customers who filed for bankruptcy after 1992, said Janice R. Drummond, a spokeswoman for the Redwoods, Ill.-based retail giant.

The dollar figure could grow if more debtors are uncovered, Ms. Drummond said.

In addition, Sears said, it will pay $23 million to $40 million as reimbursement of interest payments. These totals include 10% annual interest.

Sears also agreed to allot $40 million to be shared among the 50 states for consumer credit education programs.

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