CFPB sues debt-settlement services provider

Freedom Debt Relief is alleged to have misled customers about the extent of its services

CFPB sues debt-settlement services provider
The Consumer Financial Protection Bureau has sued debt-settlement services provider Freedom Debt Relief and its co-CEO Andrew Housser over allegations that it deceives its customers.

According to the CFPB, Freedom Debt’s illegal actions include charging its customers despite failing to settle their debts as promised and even making customers negotiate their own settlements. Freedom Debt is also alleged to have misled its customers about fees and the extent of the offered services.

CFPB said that Freedom Debt claims to its customers that it will be able to negotiate with all creditors. However, the company is aware that certain creditors do not negotiate with debt-settlement companies. Instead of Freedom settling the debt, the company will sometimes coach customers in these situations.

The company also tells customers that they will only be charged when the debt settlement is negotiated and the customer makes a payment. However, CFPB said the company charges a full fee even though creditors only stop debt collection without a settlement and when customers are able to negotiate a settlement on their own.

According to the CFPB, Freedom Debt’s practices constitute violations of the Dodd-Frank Wall Street Reform and Consumer Protection Act and the Telemarketing Sales Rule.

“Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt,” CFPB Director Richard Cordray said. “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’s lawsuit seeks compensation for harmed consumers, civil penalties, and an injunction against Freedom Debt and Housser to halt their unlawful conduct.

Related stories:
Mortgages among top CFPB complaints
CFPB launches mortgage delinquency tracker