WASHINGTON — The Consumer Financial Protection Bureau has settled its lawsuit against Freedom Debt Relief, LLC, the nation’s largest debt-settlement services provider.
The company agreed to pay $20 million in restitution to affected consumers and a $5 million civil money penalty, the Bureau stated.
The Bureau’s lawsuit alleged 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 Bureau 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.
According to the CFPB, the settlement enjoins Freedom Debt Relief from engaging in similar conduct in the future. The company has also agreed to a consent order with the Federal Deposit Insurance Corp. The Bureau will remit $493,500 of the $5 million civil penalty it assessed in light of the penalty the company was ordered to pay the FDIC. That portion of the settlement is subject to approval by the court, the CFPB said.
“I applaud the CFPB for taking action against Freedom Debt Relief," said National Consumer Law Center attorney Andrew Pizor. "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."