Sears, Roebuck and Co. has agreed to pay almost $2 million to at least 2,300 Illinois consumers to settle claims arising from its illegal collection of debt from bankrupt customers.
The agreement was announced Wednesday by Illinois Atty. Gen. Jim Ryan. In addition to consumer refunds, Ryan’s office will receive a $550,000 contribution from Sears for the state’s Consumer Enforcement and Education Fund.
Other states attorneys general also announced settlements with the Hoffman Estates-based retailer Wednesday, including those from Massachusetts, Connecticut, New York, Michigan, New Mexico, Pennsylvania, Oklahoma and New Jersey.
The separate state agreements are part of an overall restitution plan Sears announced in June. Back then, Sears agreed to pay as much as $225 million to Sears customers who filed bankruptcy between 1992 and 1997, acknowledging it wrongly collected money from them without filing repayment plans with bankruptcy courts.
Sears also created a separate $40 million fund to be split among states’ attorneys general to compensate their offices for the cost of local investigations and to promote consumer education.
The settlements filed Wednesday were required for the states to claim their funds. “These aren’t new dollars. This isn’t a new issue,” said Sears spokeswoman Jan Drummond.
Some attorney generals were more outspoken in criticizing Sears than others. Located in Sears’ back yard, Ryan took the low-key approach, noting, “This judgment ensures that consumers will get their money back and it prevents further violations of bankruptcy protections.”
Connecticut Atty. Gen. Richard Blumenthal was more vocal.
After announcing 3,503 Connecticut residents would receive an estimated $3 million, he blasted Sears for bullying consumers “into paying money the company was not entitled to collect, flagrantly breaking federal bankruptcy law.”
Blumenthal also said the settlement was proof that “no business can push consumers around regardless of its size.”
In Massachusetts, where a bankruptcy court judge first disclosed Sears’ illegal practices last spring, more than 2,700 consumers will receive refunds of $8.5 million. The Massachusetts Attorney General’s office, which spearheaded the overall settlement agreement with Sears, will receive $2.4 million.
Some 2,500 New York residents will split $2 million; more than 2,000 Pennsylvanians will divvy up $5 million in repayments and debt forgiveness.
So far, Sears has identified at least 146,000 bankrupt people across the country who were improperly treated. But a final number is not yet available, the company said.
The bankruptcy fiasco has been costly for Sears. In the second quarter, Sears took a charge of $475 million to cover the cost of its mishandling of bankruptcy cases.
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