immediate release -- Thursday, September 3, 1997.
to Credit or Pay Iowa Consumers $950,000 in Case
Concerning Illegal Debt Collection Practices
claimed Sears pressured consumers to make debt payments even after they
were protected by bankruptcy.
Attorney General Tom Miller said today that Sears, Roebuck & Co. will
compensate 556 Iowa consumers with payments or credits totaling about
$950,000, and pay the State $133,000 under terms of a consent judgment
filed today in Polk County District Court.
The judgment resulted
from a multi-state investigation of allegations that Sears systematically
used illegal collection practices to pressure consumers to make payments
on debts even after a debtor was protected by a bankruptcy order. All
fifty states are participating in the settlement.
is repaying at least $125 million to affected consumers and forgiving
about $125 million in consumer debts Sears obtained improperly. The $950,000
to Iowa consumers is based on the number of Iowans affected by Sears'
improper practices, and also is split almost evenly between repayments
and forgiving debts. Sears is paying $133,000 to the State to be used
for consumer protection education and litigation.
Miller said Sears'
alleged unlawful tactics were used against persons who had declared bankruptcy.
Acting together, the States alleged that Sears pressured consumers to
make payments on debts even if they may have been dischargeable in bankruptcy.
payments by threatening to repossess consumer goods, and they did so without
the knowledge and approval of the bankruptcy courts that is required by
law," Miller said.
practices came to light in Massachusetts, when several cases of questionable
"reaffirmation agreements" came to the attention of Chief Bankruptcy Judge
Carole Kenner, who ordered Sears to identify all cases where the company
had failed to file such agreements as required by law.
The States alleged
Sears illegally obtained the "reaffirmation agreements" -- written contracts
under which a bankruptcy debtor agrees to pay a particular debt even though
the debt would otherwise be discharged in bankruptcy. Such agreements
must be voluntary, and they must be filed with the bankruptcy court and
reviewed by the court -- requirements the States said were ignored by
The States and Sears
reached a settlement agreement in the matter in June. Formal consent judgments
are now being filed in courts, including Sears' specific payment obligations.
Polk County District Court Judge Glenn E. Pille issued the consent judgment
today in Des Moines.
Sears already is
identifying and contacting consumers affected from January 1992 through
the present, and the company will make repayments with no further action
needed by those consumers. Any monies paid to Sears will be repaid by
the company (including any finance charge or penalties, plus interest
at ten percent), and any current balance will be stricken. The States
are overseeing the process through an independent auditor.
If a customer thinks
he or she may be have been the subject of an improper reaffirmation agreement
prior to 1992, he or she should call the hot-line operated by the settlement
administrator at 1-800-529-4500. Information and claim forms will be provided.
Consumers affected after 1992 also should call the hot-line number if
they have not been contacted by Sears.