Agreement orders debt settlement firm to pay $20 million back to consumers – but discounts $5 million penalty by 10%

A settlement that orders $20 million in restitution to affected consumers, and a $5 million civil money penalty (CMP) has been reached between a large debt-settlement services company and the federal consumer financial protection agency, the agency announced Tuesday.

However, the Consumer Financial Protection Bureau (CFPB) said it will “remit” about 10% of the penalty “in light of” a penalty the company was also ordered to pay to the Federal Deposit Insurance Corp. (FDIC).

The settlement is subject to approval by federal court.

The bureau said it had settled its lawsuit against Freedom Debt Relief, LLC (of San Mateo, Calif.) which CFPB described as the nation’s largest debt-settlement services provider. In a release, the bureau said the settlement, in addition to the restitution of $20 million to affected consumers and the $5 million (reduced by $493,000 paid to the FDIC), enjoins Freedom Debt Relief from engaging in conduct outlined in the lawsuit brought by the consumer bureau.

CFPB had alleged that the company violated the bureau’s Telemarketing Sales Rule by “charging advance fees and failing to inform consumers of their rights to funds they deposited with the company.” The agency said it had also alleged that Freedom Debt Relief violated the Consumer Financial Protection Act of 2010 by charging consumers without settling their debts as promised, charging consumers after having them negotiate their own settlements with creditors, and misleading consumers about the company’s fees and its ability to negotiate directly with all of a consumer’s creditors.

Consumer Financial Protection Bureau Settles Lawsuit Against Freedom Debt Relief