A California debt settlement firm, Freedom Debt Relief, has agreed to pay about $800,000 to Washington consumers to settle allegations that the company's marketing activities and fee structures violated the Washington Consumer Protection Act.
The Washington Attorney General’s Office alleged that the firm failed to tell consumers that their credit could be detrimentally affected by the debt relief strategy the company employed and charged fees in excess of those charged by law.
The attorney general said Freedom Debt Relief advised consumers to stop paying their unsecured creditors. It told them to deposit payments into an account that, when it had become sufficiently large, the debt relief firm would use to negotiate settlements with the credit card firms. Freedom Debt Relief deducted its fees from that same account.
Washington’s Debt Adjusting Act caps the fee that a debt settlement company may charge at 15 percent of the total enrolled debt. The Washington Attorney General’s Office alleged Freedom Debt Relief sometimes charged consumers more than the state’s Debt Adjusting Act allows, took its fees before the time permitted by the statute and failed to adequately inform some consumers about how the program works.
Freedom Debt Relief countered that its activities were not covered by that law and that it didn’t break the rules. Freedom Debt Relief must refund Washington consumers for all fees paid in connection with debts that weren’t settled or are not in active negotiation programs – those fees add up to $742,613 or more, the Attorney General’s Office said. The company also will pay $70,000 to reimburse the state for the costs of the investigation and litigation.