New York Attorney General Letitia James today secured a win that will return nearly $3.6 million to thousands of New York consumers who were misled about savings they could achieve through one of the nation’s largest debt settlement companies. A proposed settlement filed in court today with Freedom Debt Relief will require the company to provide nearly $3.6 million in restitution to New Yorkers who were victims of the company’s exaggerated promises, in violation of a 2011 settlement filed with the Office of the Attorney General (OAG).
“Today’s settlement will deliver more than $3.5 million directly into the pockets of struggling consumers, many of whom continue to suffer the devastating economic impacts of COVID-19,” said Attorney General James. “Ten years after this company paid over $1.2 million to my office for its fraudulent and deceptive practices, Freedom Debt Relief is back in hot water for unlawful behavior once again. Today’s settlement will ensure additional restrictions are placed on Freedom Debt Relief so that the company can no longer take advantage of consumers.”
In 2011, the Office of the Attorney General (OAG) previously settled an investigation with Freedom Debt Relief after the company was found to be engaging in illegal, fraudulent, and deceptive practices. Under that previous settlement, Freedom Debt Relief agreed to refund $1.1 million to former customers and offer refunds of hundreds of thousands of dollars to what were current customers at the time, as well as pay $100,000 in penalties. The company also agreed to change a number of its practices to conform with both New York State and federal laws.
Among its many 2011 obligations, Freedom Debt Relief agreed to refrain from advertising certain savings that could be achieved by New Yorkers unless those savings had actually been achieved by a majority of New York consumers in the 36 months preceding the claim. Freedom Debt Relief was, however, permitted to advertise certain savings that had been achieved by a defined group of New York consumers if it clearly disclosed which consumers were in that group and what approximate percentage of the whole group of New York consumers the defined group represented.
Instead of complying with this explicit requirement in the 2011 settlement, Freedom Debt Relief continued to advertise savings on its website without making the required disclosures. For example, Freedom Debt Relief advertised savings that were achieved only by consumers who made all their monthly program deposits, but the company failed to disclose that this group represented only about one-third of New York consumers. The majority of New York consumers achieved less than half of the savings Freedom Debt Relief advertised.
Today’s settlement would allow the OAG to begin distribution of the nearly $3.6 million in restitution directly to the more than 8,000 New York consumers deceived by the company. Freedom Debt Relief has already paid the State of New York these funds so restitution can begin after the settlement has been approved by the court. Restitution will go to the thousands of New York consumers who signed agreements with Freedom Debt Relief from 2011 until 2019 and meet certain criteria. Consumers do not have to take any action to receive restitution.
Today’s settlement also reinforces the 2011 settlement’s injunctive provisions and ensures they remain in full force and effect, and further contains additional injunctive terms relating to specific savings claims and savings-range claims to prevent misrepresentations in the future. These additional injunctive terms include mandating that Freedom Debt Relief:
- Expressly states the percentage of consumers who achieve the high end range of savings claims — where it is more than five percent above what the majority of consumers achieve — so that consumers know that those high savings numbers are not typical, and
- Ensures that future savings claims are based on the consumer’s total debt with the Freedom Debt Relief program, not the usually significantly smaller amounts of debts actually settled by Freedom Debt Relief.
The OAG advises consumers facing significant credit card or other debt to:
- Be wary of debt settlement companies that promise to reduce your debt substantially or to make you “debt free.”
- Never agree to sign a contract with a debt settlement company that requires the payment of up-front fees, which are generally illegal.
- Be cognizant that enrollment in debt settlement plans may not stop creditors from bringing collection lawsuits or prevent enrolled accounts from growing larger by the addition of late fees, interest, or penalties. Also, credit reports will reflect derogatory information — including assessed late charges and non-payment of debt — and consequently credit scores will be adversely affected.
- Remember that creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed.
- Consider that enrollment in a debt settlement plan premised on stopping payments to creditors will likely lead to more frequent and aggressive creditor collection efforts, which often result in judgments, wage garnishments, and freezing of bank accounts.
- Attempt to first try to resolve an outstanding account by speaking directly to the credit card issuer. Alternatively, it may be helpful to speak to an attorney or an accredited credit counselor who can help develop a plan of action that best works for your unique situation.
- Always check a particular debt settlement company’s Better Business Bureau rating, as well as any customer reviews and complaints filed against the company.