Federated Settles Lawsuits Over Payments

Federated Department Stores Inc. agreed to a $14.6-million settlement with attorneys general in 20 states, including California, for improperly collecting payments from bankrupt credit card customers. The Cincinnati-based parent of Macy’s and Bloomingdale’s stores wrongly enticed and threatened customers who filed for Chapter 7 Bankruptcy Court protection to sign contracts agreeing to repay all or part of their debt rather than have it erased in bankruptcy, according to the settlement. Federated failed to secure court approval of the debt repayment in 13,500 cases during the last five years. The settlement includes $5 million to be paid to customers who signed the reaffirmation agreements and $2.5 million to reimburse the states for the costs of litigation. Federated also agreed to forgive $6.9 million of improperly obtained debts and will contribute $240,000 to an educational fund. Affected customers will have all their reaffirmed debt stricken, with Federated waiving any right to repossess merchandise. Federated shares rose 69 cents to close at $46.75 on the New York Stock Exchange.