Details from the suit filed today by the CFPB present an interesting set of facts. Some of these issues almost every debt settlement company in the United States must deal with on a daily basis.
The CFPB complaint makes these interesting statements.
“Freedom instructed its customers who had been making payments to their creditors to withhold any further payments and to change their billing addresses with their creditors to Freedom’s Arizona address, 4940 South Wendler Drive, Tempe, AZ 85828.
Freedom would approve consumers for enrollment in its debt settlement program even if they were not delinquent on any debts at the time of enrollment. Freedom did not independently verify hardship claims or require consumers to provide supporting documentation for hardship claims as part of its underwriting efforts.
When a debt enrolled in its debt-settlement program was settled or a creditor ceased attempts to collect the debt (in the absence of a settlement), Freedom would charge consumers fees that typically ranged between 18% and 25% of the enrolled debt amount.”
“Freedom’s Knowledge That Certain Creditors Would Not Negotiate
Freedom has long known that certain creditors have policies against negotiating with debt-settlement companies such as Freedom.
For example, in late 2011, KPIX-TV (“CBS 5”), a local San Francisco television station, aired a story about two Freedom customers who complained about Freedom’s inability to settle debts they owed to Chase. Chase confirmed to CBS 5 that it “does not work with debt-settlement companies.” So as early as 2011, Freedom had notice that Chase would not negotiate as a matter of corporate policy.
Freedom has actively sought to reverse creditors’ policies against negotiating with debt-settlement companies. For years, it has maintained a team dedicated to meeting with creditors that have frequently refused to negotiate with Freedom to persuade them to change their policies. On occasion, Housser accompanied this “creditor development team” on its meetings. And for years, Housser has been briefed every two weeks and has met frequently with the “creditor development team” to learn about its efforts to persuade creditors to negotiate with Freedom.
In 2015, Freedom requested an in-person meeting with American Express. Freedom representatives met with American Express representatives in the summer of 2015 in an effort to have American Express reverse its policy against negotiating with debt-settlement companies. Freedom did not succeed, and American Express’s policy remained unchanged.
In 2016, Freedom requested an in-person meeting with Chase. Freedom representatives met with Chase representatives in the summer of 2016 in an effort to have Chase reverse its policy against negotiating with debt settlement companies. Freedom did not succeed, and Chase’s policy remained unchanged.
Freedom has held multiple in-person meetings with Discover since 2015—including in October 2015, April 2016, and March 2017—in an effort to have Discover reverse its policy against negotiating with debt-settlement companies. Freedom’s efforts have been unsuccessful; Discover’s policy has remained unchanged.”
“Freedom’s Instruction to Consumers to Deceive Creditors
As part of the instructions given to consumers for negotiating settlements on their own, Freedom told consumers to expressly mislead their creditors when asked directly about their enrollment in a debt-settlement program. Freedom’s instructions to consumers stated: “If they ask you if you are enrolled into our program, let them know that as it pertains to this account, you are looking to resolve it on your own.” Freedom directed consumers to make this representation to a creditor when the consumers were in fact enrolled in Freedom’s program to settle that creditor account.
Freedom instructed consumers to represent to creditors that the source of settlement funds was from family, friends, tax refunds, or the sale of a vehicle. But this was not true; in fact, the funds came either from Freedom’s affiliated loan program or the funds consumers deposited in the dedicated account set up upon their enrollment in Freedom’s debt-settlement program.
Freedom did not disclose to consumers during the enrollment process that Freedom might instruct them to mislead their creditors in the event those creditors refused to negotiate with Freedom.”
You can read the rest of the complaint here.