CFPB suing Freedom Debt Relief for deceiving customers

Claims nation’s largest debt settlement services provider lies to customers

Freedom Debt Relief, the nation’s largest debt settlement services provider, built its business on lying to its customers about the company’s ability to negotiate debt settlements, the Consumer Financial Protection Bureau claims.

The CFPB announced Wednesday that it is suing Freedom Debt Relief and its co-CEO, Andrew Housser, for violating the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule by repeatedly deceiving customers.

According to the CFPB, Freedom collects fees from customers without settling their debts as promised, makes customers negotiate their own settlements, misleads them about the company’s fees and the scope of its services, and fails to inform them of their rights to money they deposited with the company.

“Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt,” CFPB Director Richard Cordray said in a statement.

“Freedom deceived consumers about its clout with creditors that it knows do not negotiate with debt-settlement companies, made some customers negotiate on their own, and misled consumers about its fees and their accounts,” Cordray added. “Today’s lawsuit seeks to stop the deception and get compensation for consumers Freedom cheated.”

According to the CFPB, Freedom claims that it has successfully negotiated and settled more than $7 billion in debts for more than 300,000 consumers. 

Here’s how Freedom’s business works, per the CFPB:

Freedom uses telemarketing to contact prospective customers, then learns who their creditors are, the amount they owe to each creditor, and additional details about their debts.

Freedom tells consumers that when the accounts have sufficient funds to make settlement offers, Freedom will negotiate with consumers’ creditors to persuade them to accept less than the actual amounts owed.

When a debt is settled, Freedom charges consumers fees that range between 18% and 25% of the amount of debt the consumer owed on the day they signed up for the program.

Freedom allegedly claims that all creditors with negotiate with the company, despite knowing that some creditors will not negotiate with companies like Freedom.

In those instances, Freedom “coaches” the customers to negotiate with the creditor, and claims that it will only charge a fee when it negotiates with the creditor directly.

But, according to the CFPB, Freedom charges its full fee even when creditors stop collections without a settlement or when consumers negotiate settlements on their own.

The company also allegedly fails to clearly disclose customers’ rights to their deposited money when they withdraw from the program.

According to the CFPB, those practices are violations of Dodd-Frank and the Telemarketing Sales Rule.

Additionally, the CFPB claims that Housser, who co-founded Freedom and runs the company, is fully aware that the company’s practices violate federal law.

“Housser has the authority and responsibility to approve Freedom’s policies and practices and to approve the content of the debt-resolution agreements that consumers sign with Freedom and on which his name and signature appear,” the CFPB states.

“Housser knows certain creditors will not negotiate with Freedom, but its debt-resolution agreements claim that all creditors are willing to work with the company,” the CFPB continues. “Housser also knows that Freedom charges consumers even if it doesn’t negotiate settlements with creditors. Yet he allows its agreements to assure consumers they will be charged only if there’s a settlement and consumers make a payment.”

The CFPB is seeking compensation for harmed customers, civil penalties, and an injunction against Freedom and Housser to halt their unlawful conduct.

HousingWire attempted to contact Freedom Debt Relief and this article will be updated should the company respond.

To read the CFPB’s full complaint, click here.

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