NEWS RELEASE
ATTORNEY GENERAL JOE MAZUREK
STATE OF MONTANA

FOR RELEASE: Aug. 10, 1998

CONTACT: Ed Nolde, 444-2026

\MONTANANS BENEFIT FROM DEBT COLLECTION SETTLEMENT

HELENA – Attorney General Joe Mazurek and the Montana Department of Commerce announced Monday that General Electric Credit Corp. (GECC), together with Montgomery Ward Credit Corp., has agreed to pay as much as $97.5 million as part of a multistate settlement.

The settlement, which stems from the company’s debt collection practices involving consumers who had declared bankruptcy, will benefit more than 100 Montana consumers directly.

GECC and Montgomery Ward Credit will pay $70 million to at least 68,000 consumers nationwide who had paid on invalid debts. In addition, the companies will pay the states $27.5 million to be used primarily for consumer protection and education programs.

Mazurek said approximately 105 Montana consumers will be reimbursed under the settlement. In addition, the companies will pay the Montana Attorney General’s Office and the state Department of Commerce more than $32,000, he said. That amount represents the state’s share of the nationwide payment, based on the percentage of violations that occurred in Montana.

GECC issues and administers private label credit cards for several dozen retailers, including Montgomery Ward. An investigation by the attorneys general confirmed that GECC had asked customers who filed Chapter 7 bankruptcy to sign a contract agreeing to repay their debt to the company, rather than have it dismissed in the bankruptcy proceedings.

Reaffirmation agreements can be valid during a bankruptcy proceeding, as long as they are voluntary, filed with the court prior to the close of the bankruptcy action, and subject to the court’s review and approval. However, Mazurek said GECC failed to file the agreements with bankruptcy courts, as required by law. GECC was thus able to avoid the court’s review of the agreements. The practice had been going on for at least four years, Mazurek said.

Under the settlement, affected customers will have all their "reaffirmed" debt stricken, with GECC waiving any right to repossess the merchandise involved. GECC also will reimburse the customers for any monies paid on the reaffirmed debt and reimburse them or provide credit for any finance charges and penalties the company assessed.

GECC will identify the customers to be reimbursed, using a process overseen by a national committee of attorneys general. Potentially affected customers who are not identified by a review of GECC’s records will receive a notice of the agreement and a short questionnaire to determine if they are eligible for reimbursement, Mazurek said.

GECC and Montgomery Ward also have agreed to an injunction that prohibits them from collecting upon reaffirmation agreements that were not properly filed and requires them to accurately disclose bankruptcy customers’ rights in connection with reaffirmation agreements proposed by a creditor.

Mazurek said the improper practices first came to light when a multistate task force of attorneys general spearheaded the investigation and settlement of a similar claim against Sears last year.

Consumers who filed for bankruptcy, signed a reaffirmation agreement with GECC and believe the agreement may not have been filed with the bankruptcy court may contact the Consumer Affairs Office, 1424 Ninth Ave, Helena, Montana 59620, 444-3553.