The Consumer Financial Protection Bureau or CFPB announced the settlement of a lawsuit Tuesday it had brought against Freedom Debt Relief, the nation’s largest debt settlement company.
The company agreed to pay $20 million in restitution to affected consumers and a $5 million civil penalty. The original suit was filed in November 2017 and an amended complaint filed in June 2018.
“I applaud the Consumer Protection Financial Bureau for taking action against Freedom Debt Relief,” said Andrew Pizor, attorney for the National Consumer Law Center. “It is especially important that the settlement included restitution for aggrieved consumers. Debt settlement and similar programs offered by companies like Freedom often do more harm than good and turn out to be a waste of money.”
Pizor said consumers should talk to their creditors directly and do their own debt settlement negotiations, or they should talk to a qualified consumer bankruptcy attorney.
The CFPB’s lawsuit alleged that Freedom Debt Relief violated the Telemarketing Sales Rule by charging advance fees and failing to inform consumers of their rights to funds they deposited with the company.
The CFPB also alleged that Freedom Debt Relief violated the Consumer Financial Protection Act of 2010 by charging consumers without settling their debts as promised, charging consumers after having them negotiate their own settlements with creditors, and misleading consumers about the company’s fees and its ability to negotiate directly with all of a consumer’s creditors.
The settlement requires that Freedom Debt Relief stop engaging in this unlawful conduct in the future. The company has also agreed to a consent order with the Federal Deposit Insurance Corp or FDIC. The CFPB will cancel $493,500 of the $5 million civil penalty it assessed because the company was ordered to pay the FDIC that amount.
The settlement needs to be approved by the court.