Magazine article American Banker

CFPB Sues Largest Debt Settlement Firm

Magazine article American Banker

CFPB Sues Largest Debt Settlement Firm

Article excerpt

Byline: Kate Berry

The Consumer Financial Protection Bureau filed a lawsuit Wednesday against Freedom Debt Relief, the nation's largest debt-settlement services provider, and its co-CEO Andrew Housser for allegedly deceiving consumers.

The CFPB said that Freedom Debt Relief charged consumers without settling their debts as promised, made customers negotiate their own settlements and misled customers about its fees.

The company, a unit of Freedom Financial Network in San Mateo, Calif., also failed to inform customers of their rights to funds deposited with the company, the CFPB said.

"Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt," CFPB Director Richard Cordray said in a press release. "Freedom deceived consumers about its clout with creditors that it knows do not negotiate with debt-settlement companies, made some customers negotiate on their own, and misled consumers about its fees and their accounts."

Housser did not return calls seeking comment.

The lawsuit, filed in U.S. District Court for the Northern District of California, alleges that Housser met with representatives at American Express, JPMorgan Chase and Discover, in an effort to get the companies to reverse their policies against negotiating with debt settlement companies.

The CFPB said that Housser knows through the failed negotiations that some major creditors will not negotiate with debt settlement companies and he failed to explain to consumers that they might have to negotiate directly with creditors themselves. …

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