ATTORNEY GENERAL HUMPHREY SIGNS MULTI-STATE SETTLEMENT WITH CIRCUIT CITY SUBSIDIARY FOR UNLAWFUL COLLECTION PRACTICES
Complaint Alleges First North American National Bank, wholly owned by Circuit City Stores, Inc. unlawfully tried to collect money from Bankrupt Consumers Friday, November 20, 1998
Minnesota Attorney General Hubert H. Humphrey III joined 43 states in an approximately $11.7 million settlement agreement with First North American National Bank (FNANB) for unlawful debt collection practices from consumers who had declared Chapter 7 bankruptcy. FNANB is a wholly owned subsidiary of Circuit City Stores, Inc. and was used by Circuit City for debt collection.
FNANB will pay an estimated total of $6 million to approximately 11,000 consumers nationwide from whom FNANB and its agents collected invalid debts. FNANB will also write-off approximately $2 million in consumer debt by no longer pursuing collection from consumers. In addition, FNANB will pay the States Attorneys General $3.7 million in civil penalties.
FNANB issues and administers private label credit cards for Circuit City Stores, Inc. As part of a 43 state group, the States investigation confirmed that FNANB had solicited customers who filed Chapter 7 bankruptcy to sign a reaffirmation agreement which is a contract agreeing to repay their debt rather than have it dismissed in bankruptcy.
After obtaining the consumers agreement to repay their debt to Circuit City, FNANB then failed to file those agreements with the bankruptcy court as required by law. Such agreements are valid only if they are voluntary, if they are filed with the bankruptcy court, and in certain circumstances, approved by the bankruptcy court. The unlawful practice is believed to have taken place over the past six years.
Minnesotas total share including the estimated canceled debt and restitution is approximately $45,000, which is the states share of the nationwide payment based on the percentage of violations that occurred in Minnesota. FNANB will pay the State of Minnesota an estimated $9100.00 in civil penalties and will pay an average of $700 as an amount of reimbursement to an approximate 51 Minnesota consumers.
"Credit card companies need to know that they must follow the law and not take advantage of consumers," said Humphrey, "if not, we will continue our vigilant watch to make sure that companies like Circuit City and First North American National Bank as well as previous credit card violators, Montgomery Ward and Sears, learn there are consequences for trying to exploit consumers."
Under the settlement, using a process overseen by the Attorneys General, the affected customers identified by FNANB will:
FNANB has also agreed to an injunction which will prohibit them from collecting upon reaffirmation agreements that were not properly filed. The company also agreed to accurately disclose all rights to bankrupt customers in connection with reaffirmation agreements proposed by the creditor.
Consumers who filed for bankruptcy, signed a reaffirmation agreement with FNANB, and believe the agreement may not have been properly filed with the bankruptcy court may contact FNANBs customer service office at (800) 677-4339 or the Minnesota Attorney Generals Office at 1400 NCL Tower, 445 Minnesota Street, St. Paul, Minnesota 55101, telephone (651) 296-3353.