The St. Louis, Missouri-based May Department Stores Company (May Co.) has agreed to settle Federal Trade Commission charges that, when it converted its Thalhimer’s customers’ charge card accounts to Hecht’s accounts, the May Co.’s conversion process transferred obsolete derogatory information to the new accounts. The process also led to the inaccurate reporting of payments and other negative data, resulting in some cases in unwarranted collection efforts, the FTC alleged.
The settlement would require May Co. to cease unwarranted collection activity related to the acquired accounts, correct the inaccurate or obsolete credit data it sent to credit reporting agencies regarding the acquired accounts, and take steps to ensure that the information maintained and reported with respect to acquired accounts is accurate.“Inaccurate credit reports continue to be among the top subjects of consumer complaints to the FTC,” said Jodie Bernstein, Director of the FTC’s Bureau of Consumer Protection. “A growing number of these errors can be attributed to inaccurate data supplied to credit bureaus by creditors. This case addresses this problem.”
In another allegation, the FTC charged May Co. with sending credit cards to consumers who had not agreed to accept them or who specifically declined them, in violation of federal law. The proposed settlement also would prohibit violations of this law .
In converting the Thalhimer’s accounts to Hecht’s accounts, the May Company created a new account and issued a new account number for each customer who had an account in good standing with Thalhimer’s. However, some of the information entered into the new account files inaccurately reflected the status of that account, the FTC alleged. For example, derogatory information such as bankruptcies pertaining solely to the old Thalheimer's accounts was included and reflected as a new entry in the new Hecht's accounts. Additionally, the effective dates of some derogatory information were advanced, causing the derogatory information to be reported by credit bureaus beyond the time limits allowed by the Fair Credit Reporting Act, alleged the FTC.
According to the complaint, May Co. failed to maintain reasonable procedures to monitor and/or test its account acquisition or conversion systems to ensure the accuracy of the information it furnishes to credit bureaus, despite the fact that the company knew or should have known that such information was inaccurate. In addition, the FTC charged that May Co. initiated collection activity on “delinquencies” that were created when consumers inadvertently made payments to the incorrect account because they were unaware that the May Co. had created a second account for them.
In the second allegation, the FTC charged that May Co., through an aggressive telemarketing effort, established credit accounts for consumers who had not received or approved the offer of credit, or who had specifically declined the offer. This violates the federal Truth in Lending Act, which states that no credit card shall be issued to any person except: (1) in response to an oral or written request; or (2) as a renewal of, or substitute for, an accepted credit card.
The proposed consent agreement to settle these charges, announced today for a public comment period before the Commission determines whether to make it binding, would address the alleged inaccuracies by requiring the May Co. to follow reasonable procedures to assure the accuracy of the information it provides to the credit bureaus bearing on the credit accounts it obtains from other retailers.
Further, the proposed settlement would require May Co., to the extent it has not already done so, within 90 days after the settlement is made final, to identify current cardholders on whom, since Jan. 1, 1992, May Co. has incorrectly reported derogatory information to any consumer reporting agency related solely to the cardholder’s open end credit plan account with a creditor May Co. has acquired. May Co. then would be required to instruct each consumer reporting agency, in writing, to remove or correct any such derogatory information.
The proposed settlement also would require May Co., after receiving written notice from a customer that May Co. has inaccurately ascribed charges, credits, payments, or other activity to an account, to cease collection activity as to the disputed amount, either directly or through any third party.
The alleged TILA violations would be addressed by a provision that would prohibit May Co. from issuing credit cards to any person except in response to an oral or written request or application for the card, or as a renewal of, or substitute for, an accepted card.
Finally, the proposed settlement contains a number of reporting requirements designed to assist the FTC in monitoring May Co.’s compliance with the terms of the settlement.
The proposed consent agreement will be published in the Federal Register shortly and will be subject to public comment for 60 days, after which the Commission will decide whether to make it final. Comments should be addressed to the FTC, Office of the Secretary, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580. The Commission vote to place the proposed agreement on the public record for comment was 4-0, with Commissioner Roscoe B. Starek, III, recused.
NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $10,000.
Copies of the complaint, the proposed consent agreement and an analysis of the agreement to aid in public comment, are available from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710. FTC news releases and other materials also are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov
(FTC File No. 932 3331)