UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 25, 1997
Sears Credit Account Master Trust II
(Exact name of registrant as specified in charter)
Illinois 33-79186-01 Not Applicable
(State of (Commission (IRS Employer
Organization) File Number) Identification No.)
c/o Sears Receivables Financing Group, Inc.
3711 Kennett Pike
Greenville, Delaware 19807
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (302) 888-3176
Former name, former address and former fiscal year, if changed
since last report: Not Applicable
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Item 5. Other Events
Reference is made to Part II, Item 1 of the Quarterly Report on Form
10-Q of Sears, Roebuck and Co. ("Sears"), attached hereto as Exhibit 99 and
incorporated herein by reference, regarding certain bankruptcy collection
practices of Sears relating to reaffirmation agreements with bankrupt credit
card holders that were not filed with federal bankruptcy courts from 1992
through April 1, 1997 (the "Unfiled Agreements").
Sears, the servicer with respect to Sears Credit Account Master Trust
II (the "Trust"), believes that a portion of the debts relating to Unfiled
Agreements may be currently reflected as receivables that have been
transferred to the Trust. Such portion has not yet been identified or
quantified, although Sears is working expeditiously to do so. Subject to
rating agency approval to the extent required by the Pooling and Servicing
Agreement, dated as of July 31, 1994, as amended, among Sears, as Servicer,
Sears Receivables Financing Group, Inc., as Seller and The First National
Bank of Chicago, as Trustee (the "Pooling and Servicing Agreement"), Sears,
as Servicer, intends from time to time, to the extent practicable, to cause
the receivables in certain accounts that include debts reaffirmed from 1992
through April 1, 1997 (including debts reaffirmed pursuant to Unfiled
Agreements) to be removed from the Trust. Such removals will reduce the
Seller's residual interest (the "Seller Interest"). To the extent that
removing such receivables is not practicable, when receivables relating to
Unfiled Agreements are cancelled, Sears, as Servicer, intends to cause such
cancellations to be treated as adjustments pursuant to Section 4.06 of the
Pooling and Servicing Agreement. Such adjustments will also reduce the Seller
Interest. Receivables removed from the Trust or cancelled will not be
treated as charged-off amounts allocable to investor certificateholders.
Sears, as Servicer, intends to cause the Seller Interest to be maintained
above the minimum level required by the Pooling and Servicing
Agreement. The proposed actions should not materially affect the interests
of any investor certificateholders and should not affect the credit
enhancement available to such investor certificateholders.
Item 7. Financial Statements and Exhibits
Exhibit No.
99. Part II, Item 1 of the Quarterly Report on Form 10-Q of Sears,
Roebuck and Co. for the quarterly period ended March 29, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Sears Credit Account Master Trust II
(Registrant)
By: Sears Receivables Financing Group, Inc.
(Originator of the Trust)
By: /S/ Gary D. Farrar
Gary D. Farrar
Vice President, Administration
Date: April 25, 1997
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EXHIBIT INDEX
Exhibit No.
99. Part II, Item 1 of the Quarterly Report on Form 10-Q of Sears,
Roebuck and Co. for the quarterly period ended March 29, 1997.
E-1
Exhibit 99
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In connection with a case pending before the United States
Bankruptcy Court for the District of Massachusetts (the "Court")
involving an individual debtor, on April 9, 1997, the Company
filed a voluntary nationwide restitution plan with the Court to
remedy certain bankruptcy collection practices relating to
reaffirmation agreements with the Company's bankrupt credit-card
holders that were not filed with federal bankruptcy courts from
1992 through April 1, 1997 (the "Plan"). In bankruptcy
proceedings under Chapter 7 of the United States Bankruptcy Code
(the "Code"), a debtor may generally agree to repay his or her
debts to creditors, but any such reaffirmations must be filed
with the bankruptcy court to be valid. The Plan contemplates
that the Company would expeditiously identify all debtors with
unfiled reaffirmation agreements during that period and remit to
them all amounts paid pursuant to such agreements, with interest.
In addition, the Company would send them a $100 gift certificate.
Subsequent to the Company's filing of the Plan with the
Court,the Company was served with two complaints, purporting to
represent a nationwide class, filed by certain bankrupt credit-
card holders of the Company with the Court on March 31, 1997 and
April 7, 1997. The complaints allege that the Company obtained
payments from these debtors under reaffirmation agreements that
were not filed with federal bankruptcy courts in violation of the
Code and certain state consumer fraud statutes. The complaints
seek a refund of all amounts paid by debtors under these
agreements, punitive damages and attorneys' fees and expenses.
The Attorneys General for the States of Massachusetts and
Missouri are also investigating the subject matter of these
complaints. The Company expects that other States Attorneys
General will become involved. The Court has provisionally
certified the class for settlement purposes only. At a hearing
before the Court, the Company and the class action plaintiffs
agreed to work towards a settlement of these matters, together
with the States Attorneys General and the United States
Bankruptcy Trustee, between now and the parties' next scheduled
appearance before the Court on June 5, 1997. No assurances can
be made, however, as to the terms, if any, upon which such a
settlement might be reached.
On April 16, 1997, the Court issued an order in the
individual debtor case referred to above requiring the Company
to reimburse the debtor $236 and referring the facts and
circumstances of the case to the United States Attorney for the
District of Massachusetts (the "U.S. Attorney") for investigation
of potential criminal activity. The U.S. Attorney has filed a
civil complaint against the Company enjoining it on a nationwide
basis from the bankruptcy collection practices referred to above,
ordering the Company to identify all debtors nationwide who were
the subject of these practices from January 1,1992 to date, and
setting forth specific time periods and methodologies for the
collection of this data. The Company has consented to the entry
of this order and is cooperating fully to obtain a prompt
resolution.
Although management is unable at this time to estimate the
impact of the resolution of the foregoing matters and therefore
has not yet recorded a provision for them, management believes
that these matters could have a material effect on the annual
results of operations of the Company.
In mid-April, several stockholders of the Company,
purporting to represent a class, filed complaints against the
Company and certain of its officers in the United States
District Court for the Northern District of Illinois, alleging
violations of the Securities Exchange Act of 1934 for failure to
disclose the bankruptcy collection practices described above in
periodic filings with the Securities and Exchange Commission
prior to April 10, 1997. The complaints seek unspecified damages
and attorneys' fees and expenses. The Company intends to defend
these cases vigorously.
The Company is subject to various other legal and
governmental proceedings pending against the Company, many
involving routine litigation incidental to the businesses. Other
matters contain allegations which are nonroutine and involve
compensatory, punitive or antitrust treble damage claims in very
large amounts, as well as other types of relief. The
consequences of these matters are not presently determinable but,
in the opinion of management of the Company after consulting with
legal counsel, the ultimate liability in excess of reserves
currently recorded is not expected to have a material effect on
annual results of operations, financial position, liquidity or
capital resources of the Company.
