According to the lawsuit, Freedom Debt Relief defrauded customers by offering to settle their debts but failing to do so. More charges from the complaint are as follows:
- The company claimed to deal with creditors, however the service required the consumer to settle their own obligations.
- It misleads clients about the costs it charges. Consumers were persuaded to believe that they only had to pay a fee once the debt was cleared. Instead, the business charges even if no action is taken to settle the obligation.
- Customers were not informed that funds kept by Freedom Debt Relief were the customer’s funds;
- It failed to inform clients that some of the creditors hired to settle debts have previously declined to negotiate with third parties to resolve debts;
- It misled the customer into believing it had employed negotiators to settle the arrears. In truth, Freedom Debt Relief merely provided individuals with advice on how to resolve their own problems.
The CFPB is suing Freedom Debt Relief for monetary damages, civil penalties, and an order to force them to stop their allegedly illegal operations. These activities include the company’s “capacity” to really negotiate a creditor settlement when it lacks the necessary competence or knowledge.
If you can’t afford to pay your debts or are robbing Peter to pay Paul, contact Bond & Botes for a free consultation.
We are experienced, local attorneys who will go over all of your alternatives with you. We can also assist you in settling your bills, creating a budget, and filing for bankruptcy. Over the last 25 years, our attorneys have assisted numerous clients in Alabama, Tennessee, and Mississippi.
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Can you negotiate with Freedom Debt Relief?
The Freedom Debt Relief program works similarly to the majority of debt settlement programs.
- You’ll meet with a representative to see if debt settlement is right for you.
- You open an FDIC-insured savings account and begin making deposits. Freedom Debt Relief can’t start talking to your creditors until you’ve put money aside in that account. Consider it a form of leverage. Your creditors will not come to the table until you demonstrate that you are serious about doing business in a language they understand.
- One by one, your debts are negotiated and (hopefully) settled. This is when things can get a little tangled. Negotiations might take months or even years, and if you don’t reach an agreement, you’ll be responsible for all interest and late fees accrued during that period.
- If you do decide to settle, you will make regular payments to Freedom Debt Relief until all of your debts are paid off. This can take anything from 24 to 48 months.
Is the Freedom Debt Relief Act real?
Freedom Debt Relief is a certified debt settlement organization situated in Arizona that helps people get out of debt by lowering their payments. Since 2002, the company has assisted over 650,000 customers and resolved more than $10 billion in debt. Debt settlement is not the best way to get out of debt, but it is a viable option for individuals who have exhausted all other options and want to avoid bankruptcy.
Can you skip a payment with Freedom Debt Relief?
Don’t worry if you missed this month’s auto loan payment; you’re not alone. According to studies, 25% of Americans in financial distress are apprehensive about making their loan payments.
Before COVID-19, if you missed a payment, your auto loan lender would disclose your non-payment to the credit bureaus after 30 days and, if you continued to skip payments, your vehicle would be seized. In today’s market, however, many lenders are willing to talk to borrowers about a variety of possibilities.
You may be able to skip one to three payments in a row without incurring late payment fines or penalties, and your credit score should not suffer as a result. However, because your auto loan’s interest will continue to accrue, you should begin planning for payback now. Before the period of forbearance finishes, you should also:
Speak with your lender: Start contacting your lender well before you expect to miss a payment, as most lenders are experiencing high phone volumes and limited personnel. They may have more options or be ready to modify the terms of your loan.
Refinance your loan: Since the pandemic began, the number of people refinancing their cars has increased. A refinanced loan could have a lower interest rate and a smaller monthly payment.
Surrender your vehicle: While this is a last resort, it may be a possibility if the value of your car is less than the amount owed on your loan. Calculate your loan-to-value ratio to gain a better sense of your financial situation. If your firm has implemented a longer-term work-from-home program and you don’t use your automobile as often as you used to, surrendering may be an option to explore.
What happens if you quit Freedom Debt Relief?
If you stop paying your debt management plan on a monthly basis, you will be kicked out of the program, and your interest rates will return to their prior levels. Some plans would cancel your account if you miss just one payment, while others may allow up to three missed payments. Because the goal of a debt management plan is to remove debt while also teaching the benefits of making on-time payments, it can only function if you make consistent monthly payments.
When you stop paying your debt management plan, the following things happen:
If you don’t think you’ll be able to keep up with your monthly payments, talk to your counselor about alternate possibilities.
Is debt settlement a bad idea?
It’s a service provided by third-party companies that claims to help you pay off your debt by negotiating a settlement with your creditors. While paying off a debt for less than you owe may appear to be a good idea at first, debt settlement can be dangerous, affecting your credit scores and possibly costing you extra money.
Is it worth it to settle debt?
It is usually preferable to pay off your debt completely if at all possible. While paying off an account will not hurt your credit as much as not paying at all, having a “settled” status on your credit report is still a bad thing.
When you settle a debt, it indicates you’ve worked out a deal with the lender and they’ve agreed to accept less than the whole amount owed as the account’s last payment. The account will be marked as “settled” or “account paid in full for less than the full balance” by the credit bureaus.
Does freedom debt relief help with student loans?
Freedom Debt Relief may be able to assist you with credit card debt, hospital bills, department store cards, and a variety of other unsecured debts. Our program is unable to assist with debts involving collateral (like auto loans and mortgages). Furthermore, we are unable to handle federal student loans.
What happens to loans in forbearance?
The servicers of most (but not all) federally backed student loans have placed loan payments on hold until September 30, 2021, thanks to the CARES Act and subsequent extensions. While loan payments are frozen, no interest will accrue, and efforts to collect any missed payments on those loans have been postponed.
Borrowers with federally backed student loans will continue to have access to relief measures embedded into their loan agreements after the relief period expires. Deferment—a payment stoppage during which accrued interest payments are subsidized—and forbearance—which normally implies the accrual of interest charges—are two examples.
Financial hardship, unemployment, military service, or college enrollment may qualify borrowers with federally subsidized student loans for loan deferments.
There are two types of forbearance for student loans: general forbearance, which is similar to the forbearance offered by mortgage and credit card lenders in response to temporary financial difficulties, and mandatory forbearance, which servicers of federally backed student loans must grant under a variety of circumstances, including payments exceeding 20% of your monthly gross income and enrollment in medical internships, AmeriCorps, the Peace Corps, or the National Guard.
Interest will continue to accrue on your loan while you are in forbearance. If you do not pay the accrued interest by the end of your forbearance period, it will be added to the balance of your loan (or capitalized), resulting in a higher payback amount.
What percentage should I offer to settle debt?
Begin by calling the main phone number for your credit card’s customer care department and requesting to talk with someone in the “debt settlements department,” ideally a manager. Describe the gravity of your circumstance. Emphasize that you’ve scraped together a small sum of money and are trying to settle one of your accounts before the money runs out. You’re more likely to get a competitive offer if you say that you have other accounts on which you’re pursuing debt settlements.
Offer a precise dollar amount equal to about 30% of your current account balance. A larger percentage or money amount will almost certainly be countered by the lender. If a payment of more than 50% is proposed, consider negotiating with a different creditor or simply saving the money to help pay future monthly expenses.
Last but not least, obtain your debt settlement agreement in writing once you’ve reached an agreement with your lender. It’s fairly uncommon for a credit card company to agree to a debt settlement over the phone only to hand over the remaining balance to a collection agency. Make sure the written agreement specifies the amount you must pay in order to be spared from making any additional payments on your whole balance.
How Much Do debt settlement companies charge?
A debt settlement company’s method differs from a do-it-yourself approach. The following is an outline of the steps involved in engaging a debt settlement firm.
1. Do some research on debt settlement firms. In the United States, there are a number of genuine debt settlement companies. They must be licensed in most states. Consumers and their money are expected to be protected by debt settlement organizations adhering to industry laws.
2. Exercise caution. Proceed with caution if a debt settlement firm guarantees specific results. They can’t promise that a creditor will agree to a debt settlement, for example. Check the websites of your Better Business Bureau, your state attorney general’s office, and consumer protection agencies such as the federal Consumer Financial Protection Bureau during your study (CFPB).
3. Inquire about costs. Once you’ve decided on a debt settlement firm, find out how much it costs to settle your debts. If the company avoids answering your queries concerning expenses, it may be a dishonest enterprise. Debt settlement agencies usually charge a 15% to 25% fee to deal with your debt; this cost could be a proportion of the initial debt amount or a percentage of the amount you’ve agreed to pay. Let’s say you owe $10,000 and settle for half of that, or $5,000. You may be compelled to pay another $750 to $1,250 in fees to the debt settlement company in addition to the $5,000.
4. Examine your financial situation. Before your debt is totally cleared, debt settlement agencies frequently need you to put money into a special savings account for 24 months or longer. These funds will be applied to a lump-sum debt settlement. You may find it difficult to keep up with these payments in some situations. As a result, you may abandon the settlement agreement before all or part of your obligation is paid off. To avoid this situation, review your budget to see if you can make debt payments for at least 24 months.
5. Find information about the schedule. The debt settlement process might take anywhere from two to four years to complete. In addition to the fees charged by the debt settlement organization, you may accrue interest and fees levied by the creditor over time. Why might a creditor charge you interest and fees? Because debt settlement organizations frequently recommend that you cease paying your creditors and instead put that money into a designated savings account while working with them. If you stop making payments to your creditor, you could be visited by debt collectors or possibly sued.
6. Choose a debt settlement firm. It’s time to choose a debt settlement business based on your research if you’re fully informed of the potential dangers and ready to move forward with debt settlement.
7. Put the finishing touches on the details. Make sure you understand the timeframe and fees before working with any debt settlement company. Also, find out how much of your early payments will go toward the company’s expenses, and how much you’ll end up spending in the long run.
8. Be aware of the tax implications. If a forgiven debt exceeds $600, the IRS considers it taxable income. So, if you pay $5,000 to resolve a $10,000 debt, the $5,000 forgiven will almost certainly be taxed.
