The May Department Stores Company; Proposed Consent Agreement With Analysis To Aid Public Comment

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