Iowa Attorney General

Contact Bob Brammer 515-281-6699 and 515-281-4209 fax
For immediate release -- Thursday, September 3, 1997.

Sears to Credit or Pay Iowa Consumers $950,000 in Case Concerning Illegal Debt Collection Practices

States claimed Sears pressured consumers to make debt payments even after they were protected by bankruptcy.

DES MOINES. 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.

Nationwide, Sears 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.

"Sears obtained 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.

Sears' collection 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 Sears.

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.

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