Freedom Debt Relief Settlements Reached

Hundreds of cash-strapped Washington consumers who were overcharged by debt-relief company Freedom Debt Relief will receive nearly $740,000, thanks to a settlement reached with the Washington State Attorney General’s Office. The settlement was reached in conjunction with a proposed class action lawsuit settlement against the company.

About 1,100 Washington consumers who collectively owed $35 million in debt enrolled in Freedom Debt Relief’s program, which purports to work out a deal with credit card providers to minimize their debt. Under its program, consumers stop making payments to their unsecured creditors and allow those accounts to go into default. Debtors then pay into a bank account they control, which is subsequently used to settle their debts. Freedom Debt Relief deducts its fees from the account. When sufficient money has accumulated in a consumer’s account, Freedom Debt Relief attempts to negotiate with creditors to settle the debts for a fraction of the balance.

The A.G. said the California-based company had broken local consumer protection laws by overcharging customers more than the state’s legal cap of 15 percent, taking fees before the legal time allowed, and failing to adequately inform consumers about how the program works.

Freedom Debt Relief stopped enrolling Washington residents in March 2009, when a private class action lawsuit was filed against it. The lawsuit, entitled Carlsen et al. v. Freedom Debt Relief, LLC, et al., is still pending a settlement approval hearing set for April 4.

Under the A.G.’s settlement, Freedom Debt Relief will refund more than 570 customers for all fees paid in connection with debts that weren’t settled or aren’t in active negotiation programs, up to $742,613 or more. The refund program will be handled through the Carlsen v. Freedom Debt Relief class action lawsuit. Once the court in that case gives approval of the proposed class action settlement in April, eligible consumers will be contacted about the refund process, how much money they are eligible to receive, and how to submit a claim.

Class members of the Freedom Debt Relief class action lawsuit, which also names Freedom Financial Network as a defendant, can read more about their rights under the proposed class action lawsuit settlement in the Settlement Notice. All class members will automatically receive refunds if the proposed settlement is approved. No claim form required.