Freedom Debt Relief Reviews. Did they Mislead the FTC?

Freedom Debt Relief

Freedom Debt Relief Reviews

On Friday October 22, 2010, Freedom Debt Relief (FDR) issued a press release touting their new “Fresh Start” program that they will be rolling out on October 27, 2010 in conjunction with the new FTC rule barring debt settlement companies from charging the thousands of dollars upfront that Freedom and most other debt settlement companies had been doing up until the new rule was passed.

After a Review, here are the highlights of the Press Release: My comments are in Red.

1. Consumers can be confident that Freedom Debt Relief will no longer be charging clients before settlements are achieved.  That isn’t by choice, FDR spent a year fighting the law and only now created this program because it had no choice and could not continue to rip off consumers with their BS front-loaded fee.

2. A service that effectively settles debt as well as excellent customer service.  To my knowledge Freedom Debt Relief has never released their actual success rate of clients who have settled all of their debt vs clients enrolled.  They like to play with numbers and say things such as “clients who have settled at least one debt.”

3. Freedom Debt Relief will continue to provide the same service but now with a fee structure that insures they only pay for results.  Because before, everybody paid, regardless of results and the FTC slapped FDR and the rest of the industry for doing that.

4. Andrew Housser the CEO of FDR, participated in the FTC rule-making process for more than a year as the Commission studied the debt relief industry’s practices, methodology and results. He forgot to mention that he participated to lead the charge and lobby against the fee ban.  He was not for it, as the press release leads you to believe.

If a consumer read this press release, they would likely come away with the feeling that Freedom Debt Relief is a leader in the settlement industry and one of the good guys that are looking out for consumers.  They have this great “Fresh Start” program with no upfront fees because they believe consumers should only pay for results.   After all, Mr. Housser participated in the FTC rule making process for more than a year to make sure these protections were put in place for consumers.

Freedom Debt Relief Reviews

We Can See What You Are Doing

Well please allow me to throw back the curtain and show you what Freedom Debt Relief actually does to consumers, and just what Andrew Housser was working so hard on with the FTC. Then consumers can decide if this is really a company they should be entrusting their financial future to. There is nothing that burns me more than the increasing number of debt settlement companies that fought the advanced fee ban tooth and nail and now have flip flopped and started issuing press releases as if they were championing this thing all along.

If you would indulge me for a moment, I will take you back all the way to June 3rd 2010, just 4 months ago, where Houser along with other industry representatives from TASC and USOBA had the following to say about the advanced fee ban when they met with FTC Commissioner Ramirez and other FTC staff members. Source

Here are the more memorable parts for your review:  Again, my comments are in Red.

1. An advance fee ban would put all industry members out of business, and it is a labor-intensive and process-intensive business.

2. Charging consumers 17% of debt upfront is a better model for fee limitations than the FTC’s proposed advance fee ban.

3. Debt settlement is a high-touch business; and it averages 9 customer interactions per month and no company will be able to capitalize all of the up-front expense that these interactions entail. Raise your hand if you hired a debt settlement company and they even contacted you once a month after you signed the contract!  High touch my “you know what.”

4. Another problem with the fee ban is that it will create a power shift to creditors and the settlement companies would not be able to get good deals for the clients. That is a nice bed time story for the kids, but can we keep the FTC comments to those that are based in reality.

5. Debt settlement companies engage in education and there would be little incentive  to engage in such education with the fee ban imposed.  In addition, companies would have the incentive to get as many people as possible enrolled in the program, even if 80% drop out. So the whole thing is just about making money and they could really give a rip about educating the consumer?  Maybe that is why the GAO estimates the typical debt settlement success rate at about 10%.  Hmm, we are getting a window into their minds here, we need to pay attention.  It is only about money and it is not about helping you.

6. If they had to operate under an advance fee ban then it would take a settlement company five years before they were cash flow positive.  Um, please check your numbers again, because if you actually only accepted clients that had the proper financial circumstances to be successful, and you actually did what your sales people promise consumers that you would do, then you would start making money much sooner than that.  If you don’t, well then YOU ARE DOING IT WRONG.

Now a month after that, Mr. Housser writes to FTC Commissioner Rosch and in a last ditch desperate plea to keep the advance fee ban from becoming law (source), states the following:

1. Under an advance fee ban, his company would not be able to break even until over 6 years after a client enrolls in his program.

2. He asserts that NO DEBT SETTLEMENT COMPANY, no matter how successful could survive with this advance fee ban in place. Certainly no debt settlement company with a 30 or 40 percent success rate and if that is you, then please don’t let the door hit your ass on the way out, because you have no business telling consumers you know how to solve their debt problems.

3. Housser further asserts that the analysis he provided demonstrates that the advanced fee ban will lead to the end of his industry, and he respectfully implored the Commissioner to not pass the advance fee ban. It will lead to an end of the companies that operate like Freedom Debt Relief, that is for sure.

So, now that you have read what Housser and Freedom Debt Relief were really doing with the FTC for a year, leading the charge against the new law.  How do you reconcile that with the new press release issued on Friday?  I am left with some quandaries and I would like your opinion.

1. FDR told the FTC that they could not break even if the advance fee ban passed until after 6 years and they along with the entire industry would not be able to operate and go out of business.  However, now they have a new “Fresh Start” program that supposedly does exactly what Mr. Housser clearly told the FTC was not possible. So did he purposely mislead the FTC in order to keep his front loaded, cash cow program going, knowing the whole time that he could certainly operate in compliance with the fee ban?

2. Should all existing Freedom Debt Relief clients be canceling and jumping out of the program and demanding refunds before the company folds its doors? If FDR didn’t mislead the FTC then they must be going out of business since they themselves stated very clearly that what they just proposed with their Fresh Start program was impossible to do.

3. How will FDR be able to continue to effectively help consumers now that this mystical power shift is going to take place and leave settlement companies like FDR with no ability to negotiate on behalf of their clients?  4 months ago Housser along with other representatives from TASC and USOBA were clear in their comments to the FTC that this would put consumers at a huge disadvantage and not allow the settlement companies to get good deals for consumers.  Now after a realistic review, why would an informed consumer want to pay Freedom Debt Relief thousands of dollars if they no longer have the ability to effectively negotiate as Housser told the FTC?

I am asking you to make the call.  Clearly FDR, TASC, USOBA and countless other companies were against the fee ban before they had no choice but to be for it.  So based on the facts, do you think Freedom Debt Relief  purposely mislead the FTC?

And a final question, if you conclude that they had no problem willingly going on the record and misleading the FTC to keep the profits rolling in, how can a mere consumer expect to hear the truth if they call an Freedom Debt Relief sales rep for help?

Something to Ponder…

What say you?

Please share your thoughts below.

About Damon Day

As a Debt Coach and a Financial Advocate, I have saved my clients Millions of Dollars by exposing the debt relief scams that other consumers fall victim to. I work directly for my clients to create custom debt relief strategies based on their own unique circumstances. Consumers who speak with me first, come out far ahead of those who don't, every single time. Guaranteed. +Damon Day

8 Responses to “Freedom Debt Relief Reviews. Did they Mislead the FTC?”

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  1. jason taylor (4 comments) says:

    Is 245 BBB complaints bad if they really have 100,000 clients? I noticd most debt settlement companies (even with 0 compliants) have an F rating.

    “…the company has served nearly 100,000 clients since 2002.”

    This is really funny-

    Andrew Housser the CEO of FDR, participated in the FTC rule-making process for more than a year as the Commission studied the debt relief industry’s practices, methodology and results. He forgot to mention that he participated to lead the charge and lobby against the fee ban. He was not for it, as the press release leads you to believe.

    • Damon Day (116 comments) says:

      Hey Jason,

      Actually you are right, 245 is not that bad considering. However, for every 1 or 2 complaints I would estimate there are at least 5 or 10 more unhappy people that didn’t complain. Also one of the dirty secrets is that most settlement companies issue what I call shut your mouth letters when they are asked for refunds.

      I haven’t seen one specifically from Freedom, but I see them from most companies. These letters are basically tell the client that they will give a partial refund if they sign this very official looking form that says they agree to never talk about it.

      Some of these are filled with all kinds of threats. So put yourself in a consumers position that just wasted 5K on a settlement company that didn’t do anything but get them sued. Now they get a 1500 refund offered as if it was a gift, with an understanding that if they tell anyone the company may go after them.

      Most consumers would just take the money and move on. Again I am not saying freedom does this, but as bad as the complaints in the industry are. They are no where near representative of that actual number of unhappy and ripped off consumers.

      Houser himself in his numbers to the FTC estimates about a 50% drop out rate. Which was why he fought so hard to keep the upfront fees, because his company was clearly enrolling people that didn’t belong there and profiting on the bad financial advice their sales people were pitching.

      Maybe their idea of good customer service is keeping people happy while we take their money. I don’t know, but I am sure not going to sit idly by while they issue a press release as if they are the champions for the consumer when in fact they represented the biggest opposition to the very thing they now claim to be for.

      I am not sure if there was a typo. Are you sure it said they have served 100,000 clients since 2002, or did it say 100,000 of their clients have been served (lawsuit) since 2002. 🙂 Tongue in cheek on the last point, but oh so appropriate.

      Thanks for sharing your thoughts Jason.

    • jason taylor (4 comments) says:

      I take it there is a difference of opinion about Care One and the BBB from the removal of my previous comment…

      • Damon Day (116 comments) says:

        Hello Jason,

        The comment was not removed. I just did not have a chance to approve it before you came back to check it. You will see it clearly posted below. Sorry for the confusion. I have to manually approve all comments because of all the spammers out there trying to throw junk comments on my blog for a link.

  2. jason taylor (4 comments) says:

    Good points Damon. I’ve had customers (in a business unrelated to the debt industry) considered sub prime and those often with serious debt and/or credit issues. Even good people sometimes become desperate in these situations and it could very easily occur where a desperate consumer files a complaint because their situation worsened and they want a refund because they lost their job or an unexpected expense came up, even if the company did what they said they would. We all know that is not the bulk of the complaints but I am sure it happens.

    Looks like the recent gov action against Care One made the BBB reconsider their membership and “A+” rating. If you Click on the BBB Badge on the Care One site they no longer have an “A+” rating, they have “no rating” as report it is under review. They tend to do this before revoking BBB membership. Here is the BBB report.

    Care One BBB

    Care one has been on of very few Debt Settlement companies to maintain a good rating and BBB membership. This is the kind of thing that creates an unfair business enviornment as there’s some (though very few) reputable companies out there who have a “D” or “F” rating.

    Here is what I think has happend as I mentiond on Steve’s site- by giving most all Debt Settlement companies a bad rating rather than grading companies on an individual bases (except for a couple rare EXCEPTIONS like Care One who probably pays the BBB huge fees) is that the BBB has actually contributed to legitimate companies having to charge higher fees to compete with the scams, who have the same “D” or “F” rating- consumers cannot tell the difference and many rely on the BBB rating!

    Also having an “F” rating forces a legitimate company to spend much more in marketing to obtain clients because so many people will shy away once they see the poor rating.

    I really hope a regulator decides to act on the BBB practices. Most government agencies are probably willing to ignore the practices of the BBB which some call some very ugly words because the BBB does indeed help governement agencies with investigations of fraudulent companies.

    The BBB was happy to give Terrorist group Hamas membership with an A- rating for $425. Need I say more?

  3. Dinah (8 comments) says:

    I do not believe in the BBB rating anymore. I complained to them about a company that was not doing the promised job and the agent/owner sort of disappeared after taking my money. It was dismissed because the agent/owner answered the complaint. Months later still no job done, no refund. Sent another complaint to BBB, dismissed for duplicate complaint. The agent/owner of the company totally disappeared with my $8,000.00. I could not even sue him because we could not serve the summons. The BBB rating of his company was still a B+. I sent letters to BBB and the manager of the Chicago BBB told me to “deal with it lady!”.

  4. Sean Ryan (1 comments) says:

    Terrific piece!

  5. Steve (2 comments) says:

    i have dealt with FDR for over 3 years, and I still owe 18,000 in debt. who can I turn too to get my fee’s back at least, I am from the state of Texas when i entered their program. They have misrepresented to me form the beginning. I have been ripped off for sure. what happens if i stop paying them and what can the bills that are left do to my wife and i except put it on our credit report which sucks anyway.