ST. LOUIS (AP) _ May Department Stores Co. settled a lawsuit involving the improper collection of payments from bankrupt holders of the company's credit cards, agreeing to pay $15 million to more than 30,000 consumers in 26 states.

The class action lawsuit was filed in April 1997 in federal court in Massachusetts. A preliminary settlement was announced Aug. 1 and finalized on Monday.

The St. Louis-based May Co. also agreed to pay $7 million to the states' attorneys general.

May was challenged on ``reaffirmation agreements'' it made with its credit-card holders who had declared bankruptcy.

In such agreements, the bankrupt customers agree to pay off the credit-card balances and the retailer agrees to let them keep their cards and promises not to try to repossess the goods bought with the cards.

Usually in bankruptcy cases, the debtor is forgiven obligations like credit-card debt and is allowed to keep the merchandise bought on credit.

A bankruptcy judge must approve such agreements. The class action lawsuits, filed by three law firms, alleged that retailers did not file the agreements or filed them and did not tell the debtors that agreements were not approved. Subsequently the debtors did not understand they were free of the credit-card debt.

``As have other retailers, we have reached a final agreement on claims made by the attorneys general,'' said May spokeswoman Rhonda West. ``The total amount to be paid under the settlement is covered by reserves.''