Freedom Debt Relief is a debt settlement company that helps people struggling with overwhelming debt. The company promises to negotiate with creditors on their behalf to reduce their debt and help them become debt-free. However, Freedom Debt Relief has faced several lawsuits over the years, raising concerns about the company’s practices and effectiveness. In this article, we will discuss the Freedom Debt Relief lawsuit and what you need to know if you are considering using their services.
What is Freedom Debt Relief?
Freedom Debt Relief is a debt settlement company that was founded in 2002. The company claims to have helped over 750,000 clients and settled over $10 billion in debt. Freedom Debt Relief offers a range of debt relief services, including debt settlement, debt consolidation, and credit counseling.
The Lawsuit Against Freedom Debt Relief
In 2019, the Consumer Financial Protection Bureau (CFPB) sued Freedom Debt Relief for allegedly deceiving consumers about its debt settlement services. The CFPB claimed that Freedom Debt Relief charged illegal upfront fees and misled consumers about its ability to negotiate with creditors.
According to the lawsuit, Freedom Debt Relief charged consumers fees before settling their debts, which is against the law. The company also allegedly misled consumers by claiming that it could negotiate with all of their creditors and reduce their debt by a specific percentage.
The lawsuit also claimed that Freedom Debt Relief failed to disclose the potential negative consequences of using its services. For example, consumers who use debt settlement services may face tax consequences and damage to their credit score. The CFPB alleged that Freedom Debt Relief did not adequately inform consumers of these risks.
The Outcome of the Lawsuit
In November 2020, Freedom Debt Relief agreed to a $25 million settlement with the CFPB over the allegations in the lawsuit. The settlement requires the company to pay $20 million in restitution to affected consumers and a $5 million civil penalty.
Under the settlement, Freedom Debt Relief is also required to make significant changes to its business practices. For example, the company must stop charging upfront fees and provide consumers with a more accurate representation of its services’ potential risks and benefits. The company must also implement a compliance management system to ensure that it complies with consumer protection laws.
What Does This Mean for Consumers?
If you are considering using Freedom Debt Relief’s services, it is essential to be aware of the lawsuit and its outcome. While the company has agreed to make significant changes to its business practices, it is essential to do your research and carefully consider your options before signing up for any debt relief services.
It is also important to note that debt settlement may not be the best option for everyone. Debt settlement can have negative consequences, such as damage to your credit score and potential tax consequences. Be sure to speak with a financial advisor or credit counselor to determine the best debt relief strategy for your individual needs.
Alternatives to Debt Settlement
If you are struggling with overwhelming debt, there are several alternatives to debt settlement that you may want to consider. For example, you can work with a credit counselor to develop a budget and repayment plan. You may also want to consider debt consolidation, which involves combining your debts into a single loan with a lower interest rate.
Bankruptcy is another option for individuals struggling with debt. While bankruptcy can have negative consequences, such as damage to your credit score, it may be the best option for individuals who cannot repay their debts through other means.
The Freedom Debt Relief lawsuit highlights the importance of doing your research and carefully considering your options before signing up for any debt relief services. While debt settlement can be an effective way to reduce your debt, it can also have negative consequences, and it is essential to weigh the risks and benefits before making a decision.
If you are struggling with debt, be sure to explore all of your options and speak with a financial advisor or credit counselor before making any decisions. By taking the time to understand your options, you can make an informed decision that will help you become debt-free and achieve financial stability.