Credit Companies to Pay or Credit 148 Iowa Consumers

Credit Companies to Pay or Credit 148 Iowa Consumers
in Case Alleging Illegal Debt Collection Practices

States claimed Montgomery Ward Credit and GECC induced consumers to make debt payments even after the consumers were protected by bankruptcy. More Iowans also may be eligible for refunds and credits.

DES MOINES.-- Attorney General Tom Miller said Friday that Montgomery Ward Credit Corporation and General Electric Capital Corporation (GECC) will compensate 148 Iowa consumers with payments or credits expected to average about $1,000 each, and pay the State $141,000 under terms of a consent judgment filed today in Polk County District Court. About 500 additional Iowans also may be eligible for refunds.

The judgment resulted from a multi-state investigation of allegations that Montgomery Ward Credit and GECC used illegal collection practices to induce consumers to make payments on debts -- even after a debtor was protected by a bankruptcy order and debts may have been dischargeable in bankruptcy.

Nationwide, Montgomery Ward Credit and GECC are expected to repay or credit about 60,000 affected consumers and pay $27.5 million to the States to be used primarily for consumer protection and education programs. Settlements are being filed today in many states.

In a similar case settled last September, Sears, Roebuck & Co. agreed to compensate 556 Iowa consumers with payments or credits totaling about $950,000, and to pay the State $133,000.

The illegal collection practices came to light in Massachusetts, when several cases of questionable Sears "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 then continued to look into the matter, including with other companies.

The States alleged the companies 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 credit companies.

Montgomery Ward Credit Corp., in contrast to the Montgomery Ward retail chain, is not in bankruptcy.

Details for Consumers

Montgomery Ward Credit and GECC already have been contacting an estimated 148 Iowans known to be affected by the settlement. Under a process overseen by the Attorneys General, consumers have been or will be reimbursed or receive credit for any payments, finance charges, or penalties paid on the illegal reaffirmation agreements, plus interest at ten per cent. The companies will strike the agreements and waive any rights to repossess the merchandise.

An estimated 486 additional Iowans may be eligible for reimbursement. Those consumers will be receiving a questionnaire that they should fill out according to the instructions in order to determine eligibility. Nationwide, it is estimated that about one-third of the consumers in this category ultimately will be eligible for credits or refunds. The independent Settlement Administrator will review the questionnaires to determine eligibility.

Consumers also may contact the Attorney General's Office for more information. Consumers who filed for bankruptcy, who signed a "reaffirmation agreement" with GECC or Montgomery Ward Credit from 1/1/93 through 6/30/97, and who believe the agreement may not have been filed properly with the bankruptcy court may contact the Attorney General's Consumer Protection Division, Hoover Building, Des Moines, Iowa 50319. Telephone 515-281-5926.