Newspaper article THE JOURNAL RECORD

Sears Willing to Pay $165 Million to Settle Claims

Newspaper article THE JOURNAL RECORD

Sears Willing to Pay $165 Million to Settle Claims

Article excerpt

BOSTON (AP) -- Sears Roebuck & Co. agreed Thursday to pay at least $165 million to settle claims the company improperly collected money from customers whose debts were erased in bankruptcy filings.

If the agreement is approved by a federal judge, attorneys for Sears said the nation's second largest retailer could begin mailing refund checks averaging hundreds of dollars per customer by Christmas.

"We were outside the law on this matter," Sears chairman and chief executive officer Arthur Martinez said from company headquarters in Hoffman Estates, Ill. "We were collecting money from people improperly or illegally." The agreement filed with Judge Carol Kenner in U.S. Bankruptcy Court could resolve several actions by government agencies and private parties. An investigation by the U.S. attorney remains open, however, and could result in additional penalties. Parties to the bankruptcy court settlement include private attorneys handling several class-action suits by customers, and attorneys general acting on behalf of 40 states. Under the agreement, Sears admits it failed to get judicial approval for repayment agreements with more than 150,000 bankrupt customers. The practice, which went back to 1985, could have involved more than double that number, Martinez said in a telephone conference call. He said the company is likely to pay between $178 million and something over $265 million to customers and the states. Sears will take a charge against earnings in the second quarter to cover the settlement costs. Companies have a right to renegotiate the debts of customers who have filed for bankruptcy court protection from their creditors.But such "reaffirmation agreements" must be approved by a bankruptcy judge. In April, Kenner ordered Sears to identify the affected customers after it told her it would no longer contest the allegation in the class-action suits. Under the terms of the agreement, Sears will refund all improperly obtained debt and resulting finance charges. …

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