The Consumer Financial Protection Bureau (CFPB or Bureau) and Freedom Debt Relief, LLC (Freedom) reached a $25 million settlement in the Bureau’s lawsuit against Freedom. The settlement brings a year and a half of litigation against the nation’s large debt-settlement services provider to a close.

The CFPB filed its suit in November 2017, alleging that Freedom charged consumers without settling their debts as promised, made consumers negotiate their own settlements, mislead consumers about its fees and the reach of its services, and failed to inform them of their rights to funds they deposited with the company.

The Stipulated Final Judgment, entered by the court on July 9, 2019, lays out the agreement by the parties. Freedom agreed to pay $20 million in restitution to consumers and $5 million as a civil money penalty. The judgment also enjoins Freedom from engaging in similar conduct in the future. Specifically, the judgment:

  • Prohibits Freedom from misrepresenting that any present creditors will negotiate settlements directly with the company and that the company can negotiate or settle debts.
  • Prohibits Freedom from charting fees for non-settlement outcomes.
  • Requires Freedom, before a consumer enrolls in its services, to prominently disclosure consumer involvement in settlements and that the consumer is entitled to receive all funds in their settlement account if the consumer withdraws from the program.

insideARM Perspective

Debt settlement companies and credit repair organizations are no strangers to debt collectors. Collection agencies and firms have daily interactions with each organization, so the industry is following the legal proceedings against these entities closely. There seems to be no shortage of activity. Just the other day insideARM reported a jury verdict that found Lexington Law, a credit repair organization, committed fraud in its scheme of mailing large volumes of dispute letters to collection agencies. Lexington Law is also the target of a lawsuit brought by another agency for similar conduct, and of a lawsuit by the CFPB for its practices when engaging with consumers.


All of this brings to view something that is often lost in the weeds: the debt collection ecosystem is dynamic. “Good guys” and “bad guys” exist on all sides of the sphere; blanket labels based simply on what side of the aisle a company sits are not the right answer and turns a blind eye to the situation at hand. As the comments to the Notice of Proposed Rulemaking begin coming in, this is something to keep in mind.

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