CHICAGO (AP) -- A federal judge Friday approved a settlement agreement in a class action lawsuit that accused General Electric Capital Corp. of unfair debt collection practices.
Under the 50-state settlement, GE Capital will reimburse bankrupt debtors a total of about $100 million.The lawsuit, filed in April 1997, claimed that Stamford, Conn.-based GE Capital solicited agreements from bankrupt debtors to repay their credit card debts but failed to notify bankruptcy courts about the agreements.
Credit card debts are erased when customers file for bankruptcy. But when customers sign reaffirmation agreements, they agree to continue paying off their debt in exchange for keeping the credit card.
The lawsuit claimed that GE Capital was required by law to file the agreements with bankruptcy courts and did not do so.
GE Capital, which owns and operates the Montgomery Ward credit card among others, admitted to no wrongdoing in the agreement.
As part of the deal, which was reached by both sides in August and approved by U.S. District Judge James F. Holderman Friday, the company will refund, with interest, all credit card payments made after debtors entered into the reaffirmation agreements between Jan. 1, 1993, and June 30, 1997.
The company will also advise credit bureaus to correct any negative credit reports related to class members' failure to pay reaffirmed debt and will contribute about $2 million to consumer education programs.
Fredric Ellis, one of the attorneys who filed the lawsuit in April 1997, said there are at least 60,000 people eligible for reimbursements under the agreement and possibly as many as 180,000 when debtors are notified of the settlement, he said.
John Oliver, a spokesman for GE Capital, said Friday that the settlement will not affect GE Capital's earnings because the company began setting aside funds in anticipation of the agreement in 1997.