Offers for debt settlement and debt repayment plans often sound too-good-to-be-true. According to the Consumer Financial Protection Bureau “a U.S. government agency that makes sure banks, lenders, and other financial companies treat you fairly”, Freedom Debt Relief’s offers actually were too-good-to-be-true.
In a recent lawsuit, the CFPB alleges that “Freedom charges consumers without settling their debts as promised, makes customers negotiate their own settlements, misleads them about its fees and the reach of its services and fails to inform them of their rights to funds they deposited with the company.”
“Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt,” said CFPB Director Richard Cordray. “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. Today’s lawsuit seeks to stop the deception and get compensation for consumers Freedom cheated.”
CFPB alleges Freedom Debt Relief:
- Misleads consumers about creditors’ willingness to negotiate: Freedom markets its “negotiating power,” but Freedom knows that certain major creditors have policies against negotiating with debt-settlement companies. Freedom does not make clear to consumers that they may need to handle the negotiations with those creditors themselves.
- Deceives consumers about the extent of its services: Freedom leads consumers to believe that the company’s experienced negotiators will deal directly with their creditors. But after they enroll with Freedom and deposit funds into an account, some consumers learn that Freedom offers only guidance or “coaching” on how to negotiate settlements on their own.
- Deceives consumers about its fees: Freedom falsely claims that it charges consumers only when it negotiates a settlement of a debt and consumers make a payment under the terms of the settlement. In fact, Freedom charges consumers its full fee even when creditors simply stop collection efforts in the absence of a negotiated settlement and consumer payment and when it takes no action on a consumer’s account.
- Fails to disclose consumers’ rights to funds: Freedom does not clearly and conspicuously inform consumers that they are entitled to get back the funds in their accounts if they leave the debt-settlement program.
If you have used the services of Freedom Debt Relief, you’ll want to keep an eye on this lawsuit as you may be entitled to damages. If you’re considering hiring Freedom Debt Relief or another debt settlement or debt consolidation provider, perhaps it’s time to reconsider.
In 2008, Colorado enacted the Colorado Uniform Debt Management Services Act (DMSA), which “regulates companies that offer and provide debt management services to Colorado residents.” The Consumer Protection Section, Consumer Credit Unit of the State Of Colorado Department of Law published an “Information for Consumers” handout which explains the following with respect to debt management in Colorado:
- You may be able to negotiate a favorable settlement yourself, without paying fees to debt
settlement providers, by contacting your creditors directly.
- Creditors are not required to participate in or cooperate with a debt management or settlement
- Plans may negatively affect your credit score and ability to obtain credit.
- Providers cannot stop collection activity, including collection calls, wage garnishment,
judgments, and litigation.
Further, providers may not:
- Charge fees for cancelling an agreement or for financial education;
- Provide membership in a club or advocacy program or coupons for goods or services;
- Guarantee or promise any particular result;
- Represent they can settle debts for a certain amount or range;
- Represent they can stop collection calls or other collection activity; and
- Offer a gift, bonus, reward or other compensation for signing an agreement.
The full “Information for Consumers” letter is here.
If you are overwhelmed by debt, schedule a free consultation with an experienced debt relief lawyer who will give you all of your options so you can make an informed decision on the best way to proceed. The Law Office of Clark Daniel Dray – (303) 900-8598.