Attorney General Thurbert E. Baker today announced that The May Department Stores Company, owner of Lord & Taylor and other retail stores nationwide, has agreed to pay approximately $22 million to consumers, state consumer protection agencies, and state Attorneys General as part of a multi-state settlement arising out of the company's unlawful debt collection practices from consumers who had declared bankruptcy.

May will pay a total of approximately $15 million to over 32,000 consumers nationwide from whom it collected invalid debts. In addition, May will pay $7.0 million to the states in civil penalties, costs, and to fund consumer protection and education programs.

Fifty-seven Georgia consumers will be reimbursed approximately $27,000.00 by May. Based upon the settlement reached with the Georgia Attorney General, May will pay the Governor's Office of Consumer Affairs (OCA) $12,600.00, which is the state's share of the nationwide payment based upon the percentage of violations that occurred in Georgia. The funds received by OCA will first be used to offset the costs of the investigation, litigation, future monitoring of May's compliance with the settlement, and the prevention of unlawful debt reaffirmation. The remainder will be designated as civil penalties to be paid into Georgia's consumer preventive education plan.

The investigation confirmed that May had solicited customers who filed Chapter 7 bankruptcy to sign a contract agreeing to repay their debt rather than have it dismissed in bankruptcy. May then failed to file those agreements with the Bankruptcy Court as required by law. The practice has been going on for at least four years.

Under the settlement, any affected customers identified by May (using a process overseen by the Attorneys General) or through a claims process will:

  • Have all their "reaffirmed" debt stricken and May will waive any rights to repossess the merchandise;
  • Be reimbursed for finance charges and penalties charged by May, and be reimbursed for any monies paid on the reaffirmed debt plus 8% compound interest; and
  • Also receive an additional payment equal to 10% of the amount they paid to May on the reaffirmed debt.

A reaffirmation agreement is a written contract by which a Chapter 7 debtor agrees to repay a debt that would otherwise be discharged in bankruptcy. These agreements can be valid if they are voluntary, provided they are filed with the bankruptcy court and, in certain circumstances, approved by the bankruptcy court.

The improper reaffirmation practices first came to light when the Attorneys General investigated and settled a similar claim against Sears in 1997. Thereafter, May cooperated in the investigation and took steps to identify accounts of customers that had signed invalid reaffirmation agreements.

States participating in this agreement include, in addition to Georgia, Arizona, California, Colorado, Connecticut, Florida, Illinois, Indiana, Maryland, Massachusetts, Missouri, Nevada, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas and Virginia.