The Consumer Financial Protection Bureau (CFPB) has settled its lawsuit against Freedom Debt Relief. As part of the settlement, the Freedom has agreed to pay $20 million in restitution to affected consumers and a $5 million civil money penalty.
In a statement, the CFPB said that the nation's largest debt relief service provider has also agreed to a consent order with the Federal Deposit Insurance Corp (FDIC). The CFPB said it would remit $493,500 of the $5 million civil "penalty it assessed in light of the penalty that the company was ordered to pay the FDIC."
In November 2017, the CFPB had filed a lawsuit against Freedom Debt Relief alleging that the company had violated the Telemarketing Sales Rule by charging advance fees and failing to inform consumers of their rights to the funds they deposited with the company.
According to the amended complaint shared by the CFPB, Freedom required consumers enrolled in its debt-settlement program to deposit funds into dedicated accounts with an FDIC-insured bank. "Freedom claimed that once there were sufficient funds in those accounts to make settlement offers to consumers’ creditors, Freedom would negotiate with the creditors to persuade them to accept less than the amounts actually owed," the complaint alleged.
The lawsuit 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."
It alleged that Freedom’s statements concerning the circumstances when consumers would be charged fees were false or misleading, were material to consumers’ decisions to enroll in Freedom’s debt-settlement program, and constituted "deceptive acts and practices, in violation of §§ 1031(a) and 1036(a)(1)(B) of the CFPA. 12 U.S.C. §§ 5531(a), 5536(a)(1)(B)."