Sears in New Battle Over Debt Collection

Sears, Roebuck & Co. faces a new class-action lawsuit accusing the nation’s largest department store company of using illegal tactics to collect debts from more than 1.5 million bankrupt customers since 1987. U.S. District Judge Vanessa D. Gilmore granted class-action status to a 1997 suit filed by a Texas couple claiming that Sears bullied consumers into agreeing to repay debts wiped out in personal bankruptcies, and harassed them with lawsuits if they didn’t. The suit seeks unspecified damages. Sears said it plans to ask the U.S. 5th Circuit Court of Appeals in New Orleans to review the decision. The Hoffman Estates, Ill.-based retailer has paid more than $500 million to settle class-action suits over its credit practices in the last two years. Sears’ use of unfiled reaffirmation agreements to collect debts from bankrupt customers resulted in the company’s guilty plea to a criminal fraud charge in February. It paid a $60-million fine in the case. In reaffirmation agreements, consumers commit themselves to repay debts that otherwise would be forgiven in bankruptcy. The company promised earlier this year to stop using unfiled reaffirmation agreements to illegally collect debts from bankrupt credit card customers. Sears’ credit card business accounted for about 11% of the company’s revenue and 55% of its operating income last year. Sears shares dipped 31 cents to close at $49.13 on the New York Stock Exchange.