Just last week Freedom Debt Relief settled with the State of Washington for a bit over $740,000. Today out of New York comes the announcement that Freedom Debt Relief os now settling an issue there for $1.1 Million.
This case should be a warning to any debt settlement company that is advertising any claims of specific savings and debt reductions within a certain period of time.
Attorney General Eric T. Schneiderman today announced a major settlement that will refund money to more than 5,000 New Yorkers across the state who were defrauded by a deceptive and harmful debt settlement company. Freedom Debt Relief, one of the country’s largest debt settlement companies, misled debt-saddled consumers about the amount of money they would save and the services it would provide, while reaping large profits in up-front fees. As part of the settlement, Freedom Debt Relief will pay $1.1 million to refund former customers, offer current customers hundreds of thousands of dollars in refunds if they withdraw from the program, and pay $100,000 in penalties to the state. Here is the Freedom Debt Relief NY settlement agreement.
The announcement comes as National Consumer Protection Week begins, and the Attorney General reminded New Yorkers that taking legal action against misconduct is just one way to attack fraud and abuse (see below for tips for consumer faced with significant credit card or other debt).
“Freedom Debt promised relief and financial stability, but left thousands of its customers even farther in the red,” Attorney General Schneiderman said. “This office has zero tolerance for those who prey on the vulnerable to make a profit, and will continue to root out the kinds of deceptive practices seen in this case. It is just as important that New Yorkers know how to both recognize and avoid a bad deal, so that they can make sound financial decisions.”
The Attorney General’s investigation revealed that Freedom Debt lured debt-ridden consumers by making false and misleading claims. It promised to eliminate large portions of debt by negotiating directly with creditors, claiming that it could reduce total debt by 40 to 60 percent. Consumers were told that they would be “debt-free” within anywhere from one to three years.
However, the fundamentally flawed program left most New York consumers with as much or more debt than they had before signing up for the service. In lieu of making even the minimum payments to their creditors, customers made monthly deposits to a designated account that was purportedly to be used to settle their debt. Freedom Debt deducted its up-front fees from this account before it engaged in a discussion with consumers’ creditors – a practice it continued until the Federal Trade Commission banned it in October 2010.
When consumers were unable to make the strict monthly deposit schedule the program required, they dropped out of the program – having paid most or all of the fees without receiving the promised services. Freedom Debt customers were required to cease paying their creditors directly as a condition of enrolling in the program, so they accrued greater interest and late fees on their debts. Some saw their credit ratings fall, and were subject to wage garnishment and debt collection suits.
As part of the settlement, Freedom Debt will pay $1.1 million in refunds to former customers who suffered financial harm. It must also provide current customers who have paid up-front fees the option to withdraw from the program and receive partial refunds, which could amount to hundreds of thousands of dollars. Current customers will also have the option to remain with Freedom Debt under the condition that they will only pay additional fees upon the settlement of their debts. Freedom Debt will also pay $100,000 in penalties, costs and fees to the state.
The Attorney General’s settlement also requires the company to comply with strict guidelines in how it represents its services. It is prohibited from misrepresenting any aspects of its debt settlement program, and may not make statements about customer savings unless those statements are substantiated by prior results and incorporate fees. Freedom Debt must notify consumers of key information about the program and the potential that it could have an adverse impact on a consumer’s credit score or lead to debt collection suits. In addition, Freedom Debt may collect fees only after settling a consumer’s debts.
Letter to be sent to consumers.
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I really appreciate your post and you explain each and every point very well.Thanks for sharing this information.And I’ll love to read your next post too.
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Ya, that “don’t respond and get option 3” trick reminds me of something. I can’t quite put my finger on it… Wait… Wait… it is coming to me. Oh Ya, that is what credit cards do when they want to jack your rate or throw in some B.S. arbitration provision into the agreement.
Why don’t they pick up the stupid phone and ask their clients what they want to do if they don’t hear back? Oh, I know, they probably are not used to actually speaking with their clients.
Unfortunately for most consumers in their B.S. front loaded program, this is only going out to consumers in NY. If Freedom was required to send this letter to all of their clients, I would put money on them being out of business by months end.
This will be interesting to watch, because if the so called largest debt settlement company is not going to be able to make the switch from front loaded to success fee, then that pretty much tells you where most all of these former front loaded fee companies are going to end up shortly.
I wouldn’t take that gamble. My advice is to get out now while you might still be able to get a partial refund.
https://getoutofdebt.org//Damon-…
Ya, that “don’t respond and get option 3” trick reminds me of something. I can’t quite put my finger on it… Wait… Wait… it is coming to me. Oh Ya, that is what credit cards do when they want to jack your rate or throw in some B.S. arbitration provision into the agreement.
Why don’t they pick up the stupid phone and ask their clients what they want to do if they don’t hear back? Oh, I know, they probably are not used to actually speaking with their clients.
Unfortunately for most consumers in their B.S. front loaded program, this is only going out to consumers in NY. If Freedom was required to send this letter to all of their clients, I would put money on them being out of business by months end.
This will be interesting to watch, because if the so called largest debt settlement company is not going to be able to make the switch from front loaded to success fee, then that pretty much tells you where most all of these former front loaded fee companies are going to end up shortly.
I wouldn’t take that gamble. My advice is to get out now while you might still be able to get a partial refund.
https://getoutofdebt.org/Damon-Day
Ha, great point! Google approves every ad before it runs. Why aren’t they be grouped in there with the trust companies that are under fire for “aiding and abetting” ?
The people who don’t respond want option 3…
Knowing Debt Settlement Clients, there will be a good size number that don’t respond.
Why would anyone go with option three?
Why would anyone go with option three?
The people who don’t respond want option 3…
Knowing Debt Settlement Clients, there will be a good size number that don’t respond.
How do they have their google account still?
Anyone want to sue google?
How do they have their google account still?
Anyone want to sue google?
Ha, great point! Google approves every ad before it runs. Why aren’t they be grouped in there with the trust companies that are under fire for “aiding and abetting” ?