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Federated Settles Bankruptcy Suit

A Federal Judge in Boston has given preliminary approval to a settlement of a nationwide class action lawsuit brought on behalf of bankruptcy debtors who reaffirmed credit card debts allegedly owed to subsidiaries, affiliates and operating divisions of Federated Department Stores. The settlement involves payments totaling approximately $4 million. Under the terms of the settlement, class members will receive account credits or cash in the amount of all principal, finance charges and late fees paid on reaffirmed debt, together with 8% interest compounded from the date of such payments.

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Attorneys representing bankruptcy debtors announced today that a Federal Judge has given preliminary approval to a settlement of a nationwide class action lawsuit brought on behalf of certain bankruptcy debtors who reaffirmed credit card debts allegedly owed to subsidiaries, affiliates and operating divisions of Federated Department Stores, Inc. (NYSE: FD) (or their predecessors in interest). The settlement, which involves payments totaling approximately $4 million, ensures that every bankruptcy debtor whose reaffirmation agreement was not pr.ply filed or approved will be fully reimbursed with interest for all payments made on such reaffirmed debt. Federated operates 411 department stores in 33 states, including Macy’s, Bloomingdale’s, Burdine’s, and The Bon Marche.

Under the terms of the settlement, class members will receive account credits or cash in the amount of all principal, finance charges and late fees paid on reaffirmed debt, together with 8% interest compounded from the date of such payments. In addition, class members will receive a credit in the amount of any unpaid reaffirmed debt, credit bureaus will be advised to correct any negative reports related to failure to pay reaffirmed debt to reflect each class member’s accurate status, and two related entities, FDS National Bank of Mason and FACS Group, Inc., will contribute a combined total of $240,000 for programs to educate persons filing for consumer bankruptcy in six states.

“This settlement is designed to fully reimburse bankruptcy debtors and to preserve the integrity of the bankruptcy process,” said Attorney Fredric L. Ellis of Boston, Massachusetts, one of the plaintiff’s lawyers involved in the case. Ellis noted that the settlement requires Federated’s credit operations units to comply with all provisions of the Bankruptcy Code, and to conduct legal compliance audits in each of the next three years. “The settlement not only corrects for past mistakes, but ensures that future debtors receive all of the protections built into the Bankruptcy Code.”

Individual notice of settlement will be sent by mail in the upcoming months to class members identifiable from Federated’s files and legal notices announcing the settlement will be published in USA today. Persons who may be unsure of their status as a member of the class or who do not receive individual notice may call a toll-free number, 888-627-2909 to obtain further information.

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