[Federal Register Volume 61, Number 84 (Tuesday, April 30, 1996)]
[Notices]
[Pages 19064-19067]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-10561]
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FEDERAL TRADE COMMISSION
[File No. 932-3331]
The May Department Stores Company; Proposed Consent Agreement
With Analysis To Aid Public Comment
AGENCY: Federal Trade Commission.
ACTION: Proposed Consent Agreement.
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SUMMARY: In settlement of alleged violations of federal law prohibiting
unfair or deceptive acts or practices and unfair methods of
competition, this consent agreement, accepted subject to final
Commission approval, would require, among other things, the St. Louis-
based company to cease unwarranted collection activity on certain
acquired credit card accounts, to correct the inaccurate or obsolete
credit data it sent to credit reporting agencies about these accounts,
and to take steps to ensure that the information maintained and
reported with respect to the acquired accounts is accurate. May would
also be prohibited from sending credit cards to consumers except: (1)
In response to an oral or written request or application for the card,
or (2) as a renewal of, or substitute for, an accepted credit card. The
Consent Agreement settles allegations that, as an example, in
converting its Thalhimer's customers' credit card accounts to Hecht's
accounts, May's conversion process transferred obsolete derogatory
information to the new accounts. The conversion process also allegedly
led to the inaccurate reporting of payments and other negative data and
to the initiation of collection activity against some customers.
DATES: Comments must be received on or before July 1, 1996.
ADDRESSES: Comments should be directed to: FTC/Office of the Secretary,
Room 159, 6th St. and Pa. Ave., NW., Washington, DC 20580.
FOR FURTHER INFORMATION CONTACT:
David Medine, Federal Trade Commission, S-4429, 6th and Pennsylvania
Ave., NW., Washington DC 20580. (202) 326-3224. Christopher Keller,
Federal Trade Commission, S-4429, 6th and Pennsylvania Ave., NW.,
Washington, DC 20580. (202) 326-3159.
SUPPLEMENTARY INFORMATION: Pursuant to Section 6(f) of the Federal
Trade Commission Act, 38 Stat. 721, 15 U.S.C. 46 and Section 2.34 of
the Commission's Rules of Practice (16 CFR 2.34), notice is hereby
given that the following consent agreement containing a consent order
to cease and desist, having been filed with and accepted, subject to
final approval, by the Commission, has been placed on the public record
for a period of sixty (60) days. Public comment is invited. Such
comments or views will be considered by the Commission and will be
available for inspection and copying at its principal office in
accordance with Section 4.9(b)(6)(ii) of the Commission's Rules of
Practice (16 CFR 4.9(b)(6)(ii)).
Agreement Containing Consent Order To Cease and Desist
The Federal Trade Commission having initiated an investigation of
certain acts and practices of The May Department Stores Company, a
corporation, (``May''), hereinafter sometimes referred to as proposed
respondent, and it now appears that proposed respondent is willing to
enter
[[Page 19065]]
into an agreement containing an order to cease and desist from the use
of the acts and practices being investigated,
It is hereby agreed by and between May, by its duly authorized
officer, and its attorney, and counsel for the Federal Trade Commission
that:
1. Proposed respondent May is a corporation organized, existing,
and doing business under and by virtue of the laws of the State of New
York. Respondent's office and principal place of business is located at
611 Olive Street, St. Louis, Missouri 63101.
2. Proposed respondent is now and has been regularly engaged in the
practice of extending consumer credit pursuant to an open end credit
plan involving a credit card, and in the practice of honoring that
credit card. Hence, respondent is a creditor as defined in Sec. 103(f)
of the Truth in Lending Act (``TILA''), 15 U.S.C. Sec. 1602(f).
3. The Federal Trade Commission has jurisdiction of the subject
matter of this proceeding and of the proposed respondent, and the
proceeding is in the public interest.
4. Proposed respondent admits all the jurisdictional facts set
forth in the draft of complaint.
5. Proposed respondent waives:
(a) Any further procedural steps;
(b) The requirement that the Commission's decision contain a
statement of findings of fact and conclusions of law;
(c) All rights to seek judicial review or otherwise to challenge or
contest the validity of the order entered into pursuant to this
agreement; and
(d) Any claim under the Equal Access to Justice Act, 5 U.S.C.
Sec. 50 et seq.
6. This agreement shall not become part of the public record of the
proceeding unless and until it is accepted by the Commission. If this
agreement is accepted by the Commission, it, together with the draft
complaint contemplated thereby, will be placed on the public record for
a period of sixty (60) days and information in respect thereto publicly
released. The Commission thereafter may either withdraw its acceptance
of this agreement and so notify the proposed respondent, in which event
it will take such action as it may consider appropriate or issue and
serve its complaint (in such form as the circumstances may require) and
decision, in disposition of the proceeding.
7. This agreement is for settlement purposes only and does not
constitute an admission by proposed respondent of facts, other than
jurisdictional facts, or of violations of law as alleged in the draft
of complaint.
8. This agreement contemplates that, if it is accepted by the
Commission, and if such acceptance is not subsequently withdrawn by the
Commission pursuant to the provisions of Sec. 2.34 of the Commission's
Rules, the Commission may, without further notice to proposed
respondent, (1) issue its complaint corresponding in form and substance
with the draft of complaint and its decision containing the following
order to cease and desist in disposition of the proceeding and (2) make
information public with respect thereto. When so entered, the order to
cease and desist shall have the same force and effect and may be
altered, modified or set aside in the same manner and within the same
time provided by statute for other orders. The order shall become final
upon service. Delivery by the U.S. Postal Service of the complaint and
decision containing the agreed-to order to proposed respondent's
address as stated in this agreement shall constitute service. Proposed
respondent waives any right it may have to any other manner of service.
The complaint may be used in construing the terms of the order, and no
agreement, understanding, representation, or interpretation not
contained in the order or the agreement may be used to vary or
contradict the terms of the order.
9. Proposed respondent has read the proposed complaint and order
contemplated hereby. It understands that once the order has been
issued, it will be required to file one or more compliance reports
showing that it has fully complied with the order. Proposed respondent
further understands that it may be liable for civil penalties in the
amount provided by law for each violation of the order after it becomes
final.
Order
Definitions
For the purpose of this Order the following definitions apply:
The terms ``open and credit plan,'' ``credit card,'' and
``cardholder'' are defined as set forth in Secs. 103(i), (k), and (m),
respectively, of the Truth in Lending Act (``TILA''), 15 U.S.C.
Secs. 1602(i), 1602(k), and 1602(m).
The term ``consumer reporting agency'') is defined as set forth in
Secs. 603(f) of the Fair Credit Reporting Act (``FCRA''), 15 U.S.C.
Secs. 1681a(f).
``Fair Credit Billing Act'' refers to Chapter 4, Credit Billing, 15
U.S.C. Sec. 1666 et seq., of the Consumer Credit Protection Act.
I
It is hereby ordered that respondent, The May Department Stores
Company, a corporation, its successors and assigns, and its officers,
agents, representatives, and employees, directly or through any
corporate subsidiary, division, or other device, do forthwith cease and
desist from failing to follow reasonable procedures to assure the
accuracy of the information that respondent maintains with respect to
cardholder accounts that respondent has acquired or acquires from other
retail sellers of consumer goods or services and that respondent
provides to consumer reporting agencies, including but not limited to
the accuracy of dates of relevant actions.
II
It is further ordered that, to the extent not already accomplished,
within ninety (90) days of service of this Order, respondent, its
successors and assigns, shall identify current cardholders on whom,
since January 1, 1992, respondent has reported incorrectly to any
consumer reporting agency derogatory information related solely to the
cardholder's open end credit plan account with an acquired creditor.
Respondent shall instruct each such consumer reporting agency, in
writing, to remove or correct any such derogatory information.
III
It is further ordered that respondent, its successors and assigns,
shall, after written notice from a consumer to its Bill Adjustment
Department in accordance with the Fair Credit Billing Act of a failure
by respondent accurately to ascribe charges, credits, payments, or
other activity to the correct account, cease collection activity as to
the disputed amount, either directly or through any third party, on any
outstanding balance that is due, in whole or in part, to respondent's
failure accurately to ascribe charges, credits, payments, or other
activity to the correct account.
IV
It is further ordered that respondent, its successors and assigns,
in order to give effect to Paragraph III of this Order, shall institute
reasonable procedures to train respondent's collection personnel in the
obligations of the Fair Credit Billing Act, and to further train
respondent's collection personnel to inform consumers who assert
billing errors of the correct address of respondent's Bill Adjustment
Department.
[[Page 19066]]
V
It is further ordered that respondent, its successors and assigns,
and its officers, agents, representatives, and employees, directly or
through any corporate subsidiary, division, or other device, in
connection with any open end credit plan, do forthwith cease and desist
from violating Sec. 132 of the Truth in Lending Act, 15 U.S.C.
Sec. 1642, and Sec. 226.12 of Regulation Z, 12 C.F.R. Sec. 226.12, by
issuing a credit card to any person except (1) in response to an oral
or written request or application for the card; or (2) as a renewal of,
or substitute for, an accepted credit card.
VI
It is further ordered that respondent, its successors and assigns,
shall maintain for five (5) years and upon request make available to
the Federal Trade Commission for inspection and copying, documents
demonstrating compliance with the requirements of this Order.
VII
It is further ordered that respondent, its successors and assigns,
shall deliver for five (5) years a copy of this Order to all present
and future personnel, agents, or representatives having
responsibilities with respect to the subject matter of this Order.
VIII
It is further ordered that respondent, its successors and assigns,
shall promptly notify the Commission at least thirty (30) days prior to
any proposed change in respondent such as dissolution, assignment, or
sale resulting in the emergence of a successor corporation, the
creation or dissolution of subsidiaries or affiliates, or any other
change in the corporation that may affect compliance obligations
arising out of the Order.
IX
This Order will terminate twenty years from the date of its
issuance, or twenty years from the most recent date that the United
States or the Federal Trade Commission files a complaint (with or
without an accompanying consent decree) in federal court alleging any
violation of the Order, whichever comes later; provided, however, that
the filing of such a complaint will not affect the duration of:
A. Any paragraph in this Order that terminates in less than twenty
years;
B. This Order's application to any respondent that is not named as
a defendant in such complaint; and
C. This Order if such complaint is filed after the Order has
terminated pursuant to this paragraph.
Provided further, that if such complaint is dismissed or a federal
court rules that the respondent did not violate any provision of the
Order, and the dismissal or ruling is either not appealed or upheld on
appeal, then the Order will terminate according to this paragraph as
though the complaint was never filed, except that the Order will not
terminate between the date such complaint is filed and the later of the
deadline for appealing such dismissal or ruling and the date such
dismissal or ruling is upheld on appeal.
X
It is further ordered that respondent, its successors and assigns,
shall, within one hundred and eighty (180) days of the date of service
of this Order, file with the Federal Trade Commission, Division of
Enforcement, a report, in writing, setting forth in detail the manner
and form in which it has complied with this Order.
Analysis of Proposed Consent Order To Aid Public Comment
The Federal Trade Commission has accepted, subject to final
approval, an agreement containing a consent order from the May
Department Stores Company, a corporation (``the respondent''). The
proposed consent order has been placed on the public record for sixty
(60) days for receipt of comments by interested persons. Comments
received during this period will become part of the public record.
After sixty (60) days, the Commission will again review the agreement
and the comments received and will decide whether it should withdraw
from the agreement and take other appropriate action, or make final the
proposed order contained in the agreement.
This matter concerns the placement of inaccurate information in the
credit bureau files of consumers whose accounts were acquired by
respondent in the course of its purchase of another retailer. The
complaint alleges these inaccuracies were a result of the process used
to convert the accounts, which, among other things, included dating
past negative activity in a way that allowed it to remain on consumers'
credit reports longer than the seven year obsolescence period found in
the federal Fair Credit Reporting Act (``FCRA''). In addition, the
complaint alleges that once respondent knew or should have known the
information was not accurate, it failed to take steps to correct it.
This matter also addresses the issuance of credit cards to
consumers who did not apply for the cards orally or in writing. The
complaint accompanying the proposed consent order alleges that in
connection with these practices, the respondent engaged in acts and
practices in violation of Section 5 of the Federal Trade Commission Act
and Section 132 of the Truth in Lending Act and Section 226.12(a)(2) of
Regulation Z.
According to Count I of the complaint, when the respondent acquires
other retail sellers of consumer goods or services, it converts the
acquired open end credit plan accounts to its own open end credit plan
accounts; an example of this occurred when it converted Thalhimer's
accounts the Hecht Co. accounts. The respondent creates new open end
credit plan accounts and issues new account numbers in the name of each
consumer having an open end credit plan account in good standing with
the retail company acquired by respondent. As part of this process,
certain inaccuracies appeared in consumers' credit files.
Respondent, in the normal course of its business, furnishes account
information concerning its open end credit plan accounts to consumer
reporting agencies. This reported information reflected the
inaccuracies allegedly caused by the respondent's account conversion
process. The complaint alleges that respondent's reporting of
inaccurate information constitutes an unfair practice in violation of
Section 5 of the Federal Trade Commission Act.
Count I also alleges that respondent on some occasions initiates
collection activity on purported delinquencies, created in error when
respondent creates a second account without the knowledge or
authorization of consumers, and subsequently posts payments and other
credits to the incorrect account. The complaint alleges that this
practice also constitutes an unfair practice in violation of Section 5
of the Federal Trade Commission Act.
Count II of the complaint alleges that in connection with telephone
marketing of offers of pre-approved open end credit plan accounts,
respondent in some cases establishes open end credit accounts for
consumers who have not received or approved the offer or who have
specifically declined the offer, in violation of Section 132 of the
Truth in Lending Act and 226.12(a)(2) of Regulation Z.
The consent order contains provisions designed to ensure that the
respondent does not engage in similar allegedly illegal acts and
practices in the future.
[[Page 19067]]
Specifically, Paragraph I of the order requires the respondent to
cease and desist from failing to follow reasonable procedures to assure
the accuracy of the information that respondent maintains with respect
to cardholder accounts that respondent has acquired or acquires from
other retail sellers of consumer goods or services and that respondent
provides to consumer reporting agencies, including but not limited to
the accuracy of dates or relevant actions.
Paragraph II of the order requires respondent, to the extent not
already accomplished, within ninety (90) days of service of the order,
to identify current cardholders on whom, since January 1, 1992,
respondent has reported incorrectly to any consumer reporting agency
derogatory information related solely to the cardholder's open end
credit plan account with an acquired creditor. The respondent must
instruct each consumer reporting agency, in writing, to remove or
correct any such derogatory information.
Paragraph III of the order requires respondent, after written
notice from a consumer to its Bill Adjustment Department in accordance
with the Fair Credit Billing Act of a failure by respondent accurately
to ascribe charges, credits, payments, or other activity to the correct
account, to cease collection activity as to the disputed amount, either
directly or through any third party, or any outstanding balance that is
due, in whole or in part, to respondent's failure accurately to ascribe
charges, credits, payments, or other activity to the correct account.
Paragraph IV of the order requires that the respondent institute
reasonable procedures to train their collection personnel in the
obligations of the Fair Credit Billing Act, and to further train their
collection personnel to inform consumers who assert billing errors of
the correct address of respondent's Bill Adjustment Department.
Paragraph V of the order requires respondent to cease and desist
from issuing credit cards to any person except (1) in response to an
oral or written request or application for the card; or (2) as a
renewal of, or substitute for, an accepted credit card.
Paragraph VI of the order requires the respondent to make documents
demonstrating compliance with the requirements of the order available
to the Federal Trade Commission for inspection and copying.
Paragraph VII of the order requires respondent for a period of five
years to deliver a copy of the order to all present and future
personnel, agents, or representatives having responsibilities with
respect to the subject matter of the order.
Paragraph VIII of the order requires that the respondent promptly
notify the Commission at least thirty (30) days prior to any proposed
change in respondent such as dissolution, assignment, or sale resulting
in the emergence of a successor corporation, the creation or
dissolution of subsidiaries or affiliates, or any other change in the
corporation that may affect compliance obligations arising out of the
Order.
Paragraph IX of the order is a provision terminating the order in
twenty years from the date of its issuance, or twenty years from the
most recent date that the Untied States or the Federal Trade Commission
files a complaint in federal court alleging any violation of the order,
whichever comes later.
Paragraph X of the order requires respondent within one hundred and
eighty (180) days of the date of service of the order, to file with the
Commission's Division of Enforcement, a written report setting forth in
detail the manner and form in which it has complied with the order.
The purpose of this analysis is to facilitate public comment on the
proposed order, and it is not intended to constitute an official
interpretation of the agreement and proposed order or to modify in any
way their terms.
Donald S. Clark,
Secretary.
[FR Doc. 96-10561 Filed 4-29-96; 8:45 am]
BILLING CODE 6750-01-M
