CFPB sues largest debt settlement services provider for deceiving consumers

By Katalina M. Bianco, J.D.

The Consumer Financial Protection Bureau has filed charges against Freedom Debt Relief, LLC, the nation’s largest debt settlement services provider, and its co-CEO Andrew Housser for deceiving consumers about its "clout with creditors." The CFPB is seeking compensation for harmed consumers, civil penalties, and an injunction against Freedom and Housser to halt their "unlawful conduct."

"Freedom took advantage of vulnerable consumers who turned to the company for help getting out of debt," said CFPB Director Richard Cordray. "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."

Complaint. The Bureau filed this action against Freedom and Housser under the Telemarketing and Consumer Fraud and Abuse Prevention Act (15 U.S.C. §§ 6102(c), 6105(d)(2012)); the Telemarketing Sales Rule (16 CFR Part 310); and the unfair, deceptive or abusive acts and practices provisions of the Consumer Financial Protection Act (12 U.S.C. §§ 5531, 5536(a), 5564, 5565), in connection with the marketing and sale of debt-settlement or debt-relief services.

Specifically, the Bureau alleges that Freedom:

• misleads consumers about creditors’ willingness to negotiate;
• fails to make clear to consumers that they may need to negotiate with creditors;
• deceives consumers about the extent of their services and their fees; and
• fails to disclose to consumers that they are entitled to a return of funds in their accounts if they leave the program.

The complaint includes Housser because, according to the CFPB, Housser co-founded and continues to exercise managerial responsibility for Freedom. The co-CEO has the authority to approve Freedom’s policies and practices and to approve the content of the debt-resolution agreements that consumers sign with Freedom and on which his name and signature appear. The complaint alleges that Housser knows Freedom charges consumers even if it doesn’t negotiate settlements with creditors but allows the agreements to assure consumers they will be charged only if there’s a settlement and consumers make a payment.

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