Yesterday, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Freedom Debt Relief, the nation’s largest debt settlement service provider, and its co-CEO Andrew Housser for misleading consumers. The CFPB alleges that Freedom bills consumers without settling their debts as promised, forces customers to negotiate their own settlements, misleads them about its fees and scope of services, and fails to inform them of their rights to the funds it provides. they filed with the company.

The CFPB announced,

Freedom Debt Relief, part of the Freedom Financial Network and based in San Mateo, California, is the largest provider of debt relief services in the United States. Andrew Housser is the co-CEO and co-founder of the company. Freedom claims to have successfully negotiated and settled over $7 billion in debt for over 300,000 consumers. Through telemarketing contacts with potential clients, Freedom learns who their creditors are, the amounts owed to each, and the nature of the debts. Freedom requires customers enrolled in its debt settlement program to deposit money in designated accounts with an FDIC-insured bank. Freedom tells consumers that when 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 a fee of between 18 and 25 percent of the amount of debt the consumer owed on the day they enrolled in the program.

According to the CFPB complaint, Freedom:

• Misleads consumers about creditors’ willingness to negotiate: Freedom markets its “bargaining power,” but Freedom knows that some major creditors have policies against negotiating with debt settlement companies. Liberty does not make it clear to consumers that they may need to handle negotiations with these creditors themselves.
• Misleads consumers about the scope of its services: Freedom leads consumers to believe that the company’s experienced negotiators will deal directly with their creditors. But after registering with Freedom and depositing funds into an account, some consumers learn that Freedom only offers advice or “coaching” on how to negotiate settlements on their own.
• Misleads consumers about its fees: Freedom falsely claims that it only bills consumers when it negotiates a debt settlement and consumers make payment according to the terms of the settlement. In fact, Freedom charges consumers its full costs even when creditors simply halt collection efforts in the absence of a negotiated settlement and consumer payment and when no action is taken on the consumer’s account. ‘a consumer.
• Does not disclose consumer rights to funds: Freedom does not clearly and prominently inform consumers that they have the right to recover funds from their accounts if they leave the debt settlement program.

Under the Dodd-Frank Act, the CFPB has the authority to take action against institutions and individuals who violate consumer financial protection laws, including engaging in unfair, deceptive, or abusive acts or practices. The lawsuit against Freedom Debt Relief and Andrew Housser seeks monetary relief, injunctive relief, and civil monetary penalties.

Company representatives did not respond to requests for comment from a number of other media outlets.

The Bureau’s announcement notes that the complaint is not a finding or determination that the company or individual actually broke the law.

Complaint is available here.

InsideARM perspective

This is the latest in a series of actions against allegedly fraudulent debt relief scams.

In October 2017 insideARM reported that the Federal Trade Commission (FTC), along with 11 states and the District of Columbia, announced “Operation Game of Loans,” the first coordinated federal-state law enforcement initiative targeting deceptive loan relief scams. student debt. Nationwide crackdown includes 36 actions by FTC and state attorneys general against scammers who allegedly used deception and false promises of relief to collect more than $95 million in illegal upfront fees from US consumers over several years.

On that on the same day in October 2017, insideARM also reported that the CFPB filed a federal lawsuit against two companies operating as “FDAA”, a service provider, and their owners for misrepresenting the FDAA as being affiliated with the federal government. The CFPB also alleges that the FDAA’s so-called “debt validation” programs violated the law by falsely promising to eliminate consumer debt and improve credit scores in exchange for thousands of dollars in anticipated charges. The CFPB lawsuit seeks to end these deceptive practices, seek redress for harmed consumers, and impose monetary civil penalties.

In May 2017 insideARM reported that the FTC announced, in conjunction with the State of Florida, that it was asking a federal court to temporarily halt a massive bogus debt relief operation that stole tens of millions of dollars from consumers in financial difficulty, including elderly and disabled people.

In June 2016 insideARM reported that the CFPB on Tuesday reached a $107 million settlement proposal with several individuals affiliated with the World Law Group. According to the Bureau, defendants Derin Scott, David Klein and Shannon Scott “received, directly or indirectly, funds or other assets” from clients of World Law Group, after the debt settlement company collected millions of initial charge to consumers for “legal fees”. services’ and then did little to help those consumers.

insideARM applauds regulators’ efforts to halt the actions of fraudulent credit repair organizations. They cause obvious harm to consumers and consume the resources of legitimate businesses.

Many creditors and collection agencies have shared with insideARM that the influx of mass litigation or debt validation requests from credit repair agencies has become a significant issue over the past year. These can often take the form of dozens or hundreds of form letters, all identical except for the consumer’s name and basic information. insideARM recently learned that the law firm Ballard Spahr had organized a very informative webinar on strategies for dealing with debt settlement companies.

—

UPDATE: Since its publication, Freedom Debt Relief has issued this statement in response to the CFPB’s formal complaint.