[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