UNITED STATES OF AMERICA
FEDERAL TRADE COMMISSION
In the Matter of
THE MAY DEPARTMENT STORES COMPANY, a corporation, also
doing business as LORD & TAYLOR, HECHTS, STRAWBRIDGES, FOLEYS,
ROBINSONS-MAY, KAUFMANNS, FILENES, FAMOUS BARR, L.S. AYRES, and MEIER &
The Federal Trade Commission, having reason to believe that The May Department Stores
Company, a corporation, also doing business as Lord & Taylor, Hechts,
Strawbridges, Foleys, Robinsons-May, Kaufmanns, Filenes, Famous
Barr, L.S. Ayres, and Meier & Frank ("respondent"), has violated the
provisions of the Federal Trade Commission Act, and it appearing to the Commission that
this proceeding is in the public interest, alleges:
- 1. Respondent The May Department Stores Company is a New York corporation with its
principal office or place of business at 611 Olive Street, St. Louis, Missouri 63101.
Respondent is engaged in, among other things, the consumer retail business. In the course
and conduct of its business, respondent has regularly extended credit for the purpose of
facilitating consumers purchase of respondents products and services
(hereinafter referred to as "consumer credit accounts").
- 2. The acts and practices of respondent alleged in this complaint have been in or
affecting commerce, as "commerce" is defined in Section 4 of the Federal Trade
THE UNITED STATES BANKRUPTCY CODE
- 3. Under the United States Bankruptcy Code (11 U.S.C. §§ 1-1330), a debtor may be
granted a discharge in a Chapter 7 bankruptcy proceeding from debts that have arisen prior
to the filing of the bankruptcy petition (hereinafter referred to as "pre-petition
debts"), meaning that the debtor is no longer individually liable for these debts.
The granting of a discharge "operates as an injunction against the commencement or
continuation of an action, the employment of process, or an act, to collect, recover or
offset any such debt as a personal liability of the debtor, whether or not discharge of
such debt is waived. . . ." 11 U.S.C. § 524(a)(2). The purpose of the injunction is
to protect the debtors "fresh start" by ensuring that no debt collection
efforts are taken against the debtor personally for pre-petition debts.
- 4. The United States Bankruptcy Code provides, however, that a debtor may agree with a
creditor that the creditor can enforce what would otherwise be a discharged debt. In other
words, a debtor may reaffirm his or her pre-petition debts, as long as certain
requirements are met. These so-called "reaffirmation agreements" are enforceable
only if, among other things, the agreement is filed with the bankruptcy court. If the
debtor is not represented by an attorney, the bankruptcy court must hold a hearing to
determine that the reaffirmation agreement would not impose an undue hardship on the
debtor and is in the best interest of the debtor, and must approve the reaffirmation
agreement before it becomes enforceable. 11 U.S.C. § 524(c) and (d).
- 5. If the requirements of 11 U.S.C. § 524(c) and (d) are not met, an agreement to
reaffirm a debt is not binding and a creditor violates the bankruptcy code if it attempts
to collect that debt. 11 U.S.C. § 524(a).
VIOLATIONS OF SECTION 5(a) OF THE FEDERAL TRADE COMMISSION ACT
- 6. From at least 1986 to 1997, respondent regularly induced consumers who had filed for
protection under Chapter 7 of the United States Bankruptcy Code to enter into agreements
reaffirming some or all of their pre-petition consumer credit account debts that would
otherwise be discharged through bankruptcy proceedings.
- 7. In numerous instances, respondent represented, expressly or by implication, to
consumers that their reaffirmation agreements would be filed with the bankruptcy courts,
as required by the United States Bankruptcy Code.
- 8. In truth and in fact, in many cases respondent did not intend to file, and in fact
did not file, the reaffirmation agreements with the bankruptcy courts. Therefore, the
representation made in Paragraph 7 was, and is, false or misleading.
- 9. In numerous instances, respondent represented, expressly or by implication, to
consumers that their reaffirmation agreements were legally binding on the consumers and
that the consumers were legally required to pay their pre-petition debts.
- 10. In truth and in fact, in many cases, the reaffirmation agreements were not legally
binding on the consumers and the consumers were not legally required to pay their
pre-petition debts for reasons including, but not necessarily limited to, the following:
(a) respondent did not file the reaffirmation agreements with the bankruptcy courts; or
(b) respondent filed the reaffirmation agreements, but the agreements were then not
approved by the bankruptcy courts. Therefore, the representation made in Paragraph 9 was,
and is, false or misleading.
- 11. In the course and conduct of its business, respondent regularly collected from
consumers debts that had been legally discharged in bankruptcy proceedings and that
respondent was not permitted by law to collect. Respondents actions have caused or
were likely to cause substantial injury to consumers that is not offset by any
countervailing benefits and is not reasonably avoidable by these consumers. 15 U.S.C. §
5(n). Therefore, respondents collection of debts that it was not permitted by law to
collect was, and is, unfair.
- 12. The acts and practices of respondent as alleged in this complaint constitute unfair
or deceptive acts or practices in or affecting commerce in violation of Section 5(a) of
the Federal Trade Commission Act.
THEREFORE, the Federal Trade Commission this day of , 1998, has issued this complaint
By the Commission.
Donald S. Clark