You may be researching whether to pursue debt relief and are wondering whether Freedom Debt Relief has been involved with a lawsuit in 2020 or 2021. Are you wondering whether Freedom Debt Relief lies? Or, is Freedom Debt Relief a scam? Let’s cover the basics of the 2 lawsuits below.
When you’re always bombarded with calls about your debt, opting for a debt settlement company seems like the best option available. However, there are certain things that can help you make the decision. Let’s look at Freedom Debt Relief lawsuits that have been filed that can help you make the most informed decision.
Debt Relief Company’s Reviews and Fees
Debt relief via debt settlement can be a helpful option, but it is not the ONLY option. You may want to holistically compare all of your options and the potential fees and companies that offer those options.
We built the following free resource to help you understand all of your options, so you can compare those options to Freedom Debt Relief
- Compare reviews of other debt relief companies
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Freedom Debt Relief Lawsuit 2017: CFPB sues Freedom Debt Relief for misleading Consumers
In November 2017, Reuters reported that the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against Freedom Debt Relief, and Executive Andrew Housser, the company’s
Freedom Debt Relief is one of the US’s most prominent debt relief companies. It has its offices in San Mateo, California and Arizona. The company launched in 2003, and according to its website, they’ve helped to solve over $6 Billion worth of debt crises. Let’s do a careful consideration of the lawsuit:
Detailed Exposé of the Freedom Debt Relief Lawsuit
The Consumer Financial Protection Bureau on the 8th of November 2017 filed a legal case against the country’s most popular debt-settlement provider and one of its executives for deceiving a number of consumers.
It is alleged that Freedom requested payments from consumers to help negotiate their debt payments. However, Freedom reneged on this promise, making their customers negotiate their payments themselves without refunding the payment collected. Thereby misleading consumers about its reach of services and fees. They also failed to inform consumers of their right to a refund.
What CFPB Wanted
The Consumer Financial Protection Bureau aimed for compensation on behalf of their harmed customers, civil penalties, and an injunction mandating Freedom and Housser from continuing their unlawful practices.
According to CFPB Director Richard Cordray, “Freedom cunningly benefited from indebted consumers that approached the company for help in exiting their predicament.“
He further explained that “Freedom methodologically created a false impression about its influence with creditors, and that it claims it can negotiate with even creditors that it knows do not negotiate with debt-settlement companies.” In the end, some customers that have already made requisite debt-settlement payments still had to negotiate on their own. This lawsuit was filed to prevent the company from deceiving other potential clients and to ensure they’re duly compensated when cheated.
Freedom Debt Relief is a subsidiary of the Freedom Financial Network. Andrew Housser is the co-founder and co-CEO of freedom. The company claims to have negotiated and settled the debts of over 300,000 consumers.
By engaging in telemarketing contacts with its prospective customers, Freedom identifies a customer’s creditors, what the debtor owes, and the type of debt.
Freedom’s Process in Question
Freedom mandates the customers that have expressed interest in its debt-settlement program to deposit stipulated amounts into an account that’s insured by the FDIC. Freedom tells its customers that when an account has enough funds to initiate settlement offers, Freedom will hold a series of meetings with the creditors, urging them to accept less than what is owed.
Upon a successful debt settlement, Freedom requires that consumers pay an amount that ranges from 18% to 25% of the total amount owed at the time they signed up for the debt reduction program.
The agreement all debtors sign with Freedom claims this amount. The agreement also noted that all creditors will hold debt-reduction negotiation rounds with Freedom. However, Freedom in itself is aware that some creditors don’t entertain negotiations with companies offering debt settlement services.
In an instance where a creditor will not negotiate with a consumer, Freedom “coaches” the consumers rather than directly engaging with creditors.
Freedom claims that it’ll only charge a fee when it negotiates debt settlement, and the consumer makes the requisite payment.
Freedom allegedly collects its full fee even when creditors don’t accept settlement via Freedom, and consumers have done the negotiation by themselves.
The company allegedly didn’t also hint to consumers about their right to withdraw from their account funds when they exit the program. By doing this, Freedom has allegedly violated the Consumer Protection Act, Telemarketing Sales Rule, and Dodd-Frank Wall Street Reform.
As described by the Consumer Financial Protection Bureau, Freedom:
Deceives consumers about the willingness of creditors to negotiate with its services:
Freedom makes consumers believe that it has a top-notch negotiating power that appeals to all creditors in the country. But Freedom is well aware that some creditors have policies that restrict holding negotiations with debt-settlement organizations. Freedom, at no point in its interface with consumers, does not explain to consumers that they may have to negotiate with creditors themselves.
Deceives its customers on its range of services:
Freedom makes consumers believe that it actually deals with creditors directly and negotiates for a pay reduction. However, after they deposit requisite money into a stipulated account for that purpose, they then offer only guidance on how to negotiate a debt settlement with creditors.
Deceives its customers about their fees:
Freedom clearly stipulated in its agreement with its customers that it’ll only charge requisite fees when it has negotiated its settlement, and consumers make required payment under settlement terms. However, Freedom deducts its full payment from consumers’ accounts even when no agreement is reached.
Fails to explain consumers’ right to funds:
Freedom did not elucidate on client’s rights, and that they can get their funds back if they exit the debt-settlement program.
Andrew Housser was jointly sued here because he’s the co-founder of the organization, and it continues to exercise managerial responsibility for the company’s affairs. Housser allegedly can independently alter Freedom’s policies and practices. He’s also saddled with the responsibility to alter and approve Freedom’s practices and policies and to fix the content of Freedom’s debt-resolution agreements on which his signature and name appear.
Housser may have been aware that a number of creditors won’t negotiate with his organization, even when his company’s agreement clearly implies that all creditors have expressed readiness to work with his organization.
Housser may also be aware that Freedom takes payment from consumers even when the organization does not negotiate with creditors in any way, type, or form. Even with this knowledge, he still allowed the agreement to promise consumers that they’ll only be charged in an instance of a settlement.
CFPB alleged that there may have been a violation of the Telemarketing Sales Rules and the Dodd-Frank Act.
CFPB, under the Dodd-Frank Act, is empowered to take legal action against organizations and persons that violate the consumer financial protection of the United States. This includes engaging in deceptive, abusive, or unfair practices or acts.
The complaint against Andrew Housser and Freedom aims at getting civil penalties, injunctive relief, and monetary relief.
It’s worthy of note that the CFPB’s complaint is not a ruling or finding that an individual has violated a law. Thus, we’ll consider the judgment given.
Settlement Reached about the Case
On July 9, 2019, the United States District Court for the Northern District of California gave an order and final settlement. The order enjoined Freedom from engaging in deceptive conduct and prevented it from charging fees for a non-settlement resolution that the organization undertook. The settlement also required Freedom Debt Relief to provide some disclosures about negotiations about its negotiations with creditors to consumers when they withdraw from a debt-relief program.
The company is mandated to pay a total sum of $20 million to CFPB as restitution, and to submit a delta compliance plan to CFPB, identifying the consumers that have been affected by its shadiness.
Lastly, the court also mandated Freedom Debt Relief to pay a sum of $5 million dollars as civil money penalty. $439,500 of that amount should be paid to FDIC, according to another consent order.
Prior to this judgment date, CFPB filed an amended complaint on June 1, 2018. This amended complaint was on the basis that Freedom Debt Relief encouraged its consumers to misrepresent the company’s involvement during direct negotiations between creditors and their customers.
On page 2 of the settlement, see the details about Freedom Debt Relief’s position regarding the settlement.
Defendants neither admit nor deny any allegations in the First
Amended Complaint, except as specifically stated in this Order. For the purposes
of this Order, Defendants admit the facts necessary to establish the Court’s
jurisdiction over them and the subject matter of this action
Freedom Debt Relief Lawsuit 2020: New York State Office of the Attorney General
Detailed Exposé on the Case
The petitioner, which is the People of the State of New York, was filed by Letitia Jame who is New York’s Attorney General. She filed the lawsuit against Freedom Debt Relief Company in the New York County Supreme Court on June 23, 2020.
The aim of this case is to obtain monetary relief and an injunction, and civil penalties from both Freedom Debt Relief, and its parent company. New York’s AG’s office alleged that they’ve violated the Assurance of Discontinuance with the NYAG that Freedom had signed up to on the 7th of March, 2011.
Unsurprisingly, Freedom Debt Relief agreed to the terms of the settlement without denying or admitting any of the allegations made by the Attorney General.
Settlement Gotten by the AG’s Office
The New York State Office of the Attorney General got a settlement with the debt relief company accused of deceptive activities. This is the office’s second settlement reached with such a firm in nine years.
From the judgment, Freedom Debt Relief is mandated to return a sum of $3.6 million to some of its customers. These were customers misled by the amount of savings they would get by hiring the service of the company.
Through a 2011 enforcement order, the company is mandated to give information on the percentage of consumers that earned some of the savings it advertises in its promotional materials.
Understanding the Background
For example, Freedom advertised the savings persons that made all requisite deposits, however, the advert only represented a third of its New York consumers. Also, the company was fraudulent here as the average customer saved far less than what Freedom advertised. You’ll find a copy of the proposed settlement here.
The disclosure requirement here is one of the 2011 settlements that exist between Freedom Debt Relief and the New York Attorney General. The constituent of that settlement states that Freedom Debt Relief should return $1.1 million dollars to some of its customers, while the company was slammed with a fine of $100,000. But this time, the company is mandated to refund a mouth-watering sum of $3.6 million to its followers, and also adhere to these terms:
- Unequivocally clarify the percentage of its customers that save money through its program. They should in particular states where it is 5% or higher than what most consumers get. This way, consumers can know that these high savings figures are not a trend.
- To ensure that its future savings claims are derived from the company’s total consumer debt as regards the Freedom Debt Relief Scheme. This opposes the practice of deriving the percentage only from the small debts it settles.
According to the New York attorney general, “This judgment delivers over $3.5 million directly to the coffers of indebted consumers, many of which are currently suffering the financial impact of the COVID-19 pandemic.” Letitia James said in a speech. She reiterated that Freedom Debt Relief shows a tendency of being a very fraudulent company, ten years after the organization was fined $1.2 million for the same offense.
Has There Been A Class Action Lawsuit Against Freedom Debt Relief?
At the time of writing this article, we could not find any class action lawsuits against Freedom Debt Relief.
What Would We Do?
Freedom Debt Relief has helped thousands of people eliminate debt. So, you will see Freedom debt relief reviews that are good reviews. That said, it can be helpful to research the Freedom Debt Relief pros and cons and the 2 lawsuits below.
At Ascend, we started as a debt settlement company then decided it would be more helpful to folks if we built debt settlement calculators to help them understand their options. As such, the debt settlement calculator below helps you compare debt settlement costs and rates and compare your options for bankruptcy, debt management, and debt payoff planning.
When you are considering Freedom Debt Relief or any debt relief firm, it can be helpful to review the debt settlement pros and cons. While you can save money, that savings can come out at a cost. Take our free debt relief comparison calculator to compare your options.