If you’re feeling overwhelmed by debt, offers of debt relief might seem as enticing as a cold glass of water in the desert.
Freedom Debt Relief is a company that offers debt settlement services to help people get rid of their debt faster — for a fee. In this Freedom Debt Relief review, you’ll learn about the services the company offers, other factors to consider, and an alternative option.
Freedom Debt Relief review: The basics
Freedom Debt Relief offers debt settlement services, also known as debt relief or debt negotiation, to its customers. To qualify, you must owe at least $7,500 in unsecured debt, such as credit card debt, personal loans, or medical bills.
You can start with a free debt evaluation, where you’ll talk with a consultant about different debt repayment strategies and determine if debt settlement is right for you.
If you’re a good fit for the program, Freedom Debt Relief offers to negotiate with your creditors to reduce the amount you owe.
You’ll set up a Dedicated Account and a payment schedule with Freedom Debt Relief. Once you’ve paid enough into the account, the company will start negotiating with your lenders.
According to the company’s website, the process typically takes between 24 and 60 months, depending on how much you pay into your Dedicated Account. It also says you can save between 15% and 35%, but there are no guarantees.
If Freedom Debt Relief reaches a settlement with one of your creditors, it will reach out to you for authorization before proceeding.
Keep in mind that you need to continue making payments to your creditors throughout the process in addition to paying into your Dedicated Account with Freedom Debt Relief.
So, if you’re already struggling to get by, you could fall behind on your payments, which could hurt your credit score. It’s essential that you’re open about your budget during the initial consultation so you don’t get in over your head.
Fees for the program range from 15% to 25% of your enrolled debt, with an average of 21.5%.
Freedom Debt Relief review: Lawsuits and responses
Freedom Debt Relief positions itself as the leader in debt negotiation, resolving over $8 billion in debt. But over the years, the company has been the target of lawsuits claiming it takes customers’ money without providing promised results.
State lawsuits filed against Freedom Debt Relief
In 2009, the district attorney’s office in San Mateo, California, where the company is headquartered, filed a suit claiming several infractions, including the following:
- The company didn’t attempt to contact all the creditors of each customer to initiate a settlement negotiation.
- The company told customers it was settling their debt accounts. Months later, customers found out the accounts had been sent to collections or creditors had filed lawsuits against customers.
- The company rebuffed customers when they asked about the status of their settlements.
- Some customers were denied the money-back guarantee the company offered.
That same year, Washington state residents filed a class-action lawsuit against the company, claiming it charged fees above the state’s maximum and didn’t inform customers that the process might ruin their credit.
The company has settled lawsuits in Colorado, Delaware, New York, and Rhode Island as well.
A company spokesperson pointed out that regulations have changed since these lawsuits and that the debt relief industry and Freedom Debt Relief have made positive changes.
Federal lawsuit filed against Freedom Debt Relief
In November 2017, the Consumer Financial Protection Bureau (CFPB) filed a federal lawsuit against Freedom Debt Relief. In the filing, the CFPB accused the company of the following:
- Charging customers without settling their debt as promised
- Making customers do their own settlement negotiations
- Misleading customers about fees and the scope of its services
- Failing to inform customers of their rights to funds they deposited with the company
In an official response to the lawsuit, Freedom Debt Relief stated that the CFPB “fundamentally misunderstands” the debt settlement process and maintained that its practices are both compliant and ethical.
Is debt settlement right for you?
Freedom Debt Relief and similar companies can help you settle your credit card and loan balances for less than what you owe. But the service isn’t right for everyone.
The biggest drawback we see is that there’s no guarantee your debt will be settled, and that problem isn’t unique to Freedom Debt Relief. So, in some situations, you might pay fees without seeing the benefits you anticipated.
Also, if your creditors do forgive a portion of your debt, that amount could be considered taxable income. If you can afford the tax bill, that might not be an issue, but it’s important to plan for it.
Freedom Debt Relief review: Also consider these alternatives
If you’re neck-deep in debt, Freedom Debt Relief’s services are one option. But before you sign up, consider your other options as well.
For instance, see if you’re eligible to work with a certified credit counselor through the National Foundation for Credit Counseling. Certified agencies are largely funded through voluntary contributions from creditors and local grants, so they often charge little or nothing.
Also look into consolidating your debt with a debt consolidation loan. Just keep in mind that you’ll generally need good credit or a cosigner with good credit to get approved.
There’s no single best way to tackle your debt, so take the time to research your options, consider what you can qualify for, and make sure the benefits outweigh the costs. The important thing is that you continue taking steps toward eliminating your debt once and for all.
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