This section of the joint stipulated judgment did not refer to coached settlements, although the joint stipulated judgment defined coaching for purposes of the compliance relief. that if FDR requests that the consumer negotiate directly with the creditor, the consumer may decline to negotiate with the creditor and either request that FDR continue attempts to negotiate a settlement of the enrolled debt with the creditor or withdraw the enrolled debt without charge or penalty at any time before it is settled.that in some instances, FDR may request that the consumer negotiate directly with the creditor and.Required Disclosures Relating to Consumer Involvement in SettlementsįRD agreed to "clearly and prominently" disclose to consumers before enrollment in a debt settlement plan: Required Disclosures Relating to Settlement AccountsįDR must, before enrollment, clearly and conspicuously, as defined in the TSR, disclose to each consumer that if the consumer withdraws from FDR's debt-relief program, the consumer is entitled to receive all funds in the settlement account other than funds earned by FDR. The joint stipulated judgment prohibits FDR from requesting or receiving a fee, or from assisting others in requesting or receiving a fee, in consideration for or in connection with a non-settlement outcome. Prohibition on Charging Fees for "Non-Settlement Outcomes"Ī "non-settlement outcome" means an outcome involving an enrolled debt that does not include a settlement with the creditor but that FDR considers to be a resolution. the circumstances in which FDR charges fees.FDR's present ability to negotiate or settle an enrolled debt and.whether any present creditor will negotiate debt settlements directly with FDR.In addition to the financial and other relief, FDR agreed to several substantive provisions that require the attention of all debt settlement companies.įDR cannot mispresent, or assist others in misrepresenting, expressly or impliedly, the following: The parties settled the lawsuit on July 9, 2019. These instances of consumer involvement allegedly arose as a consequence of FDR failing to disclose that there are certain creditors who, allegedly, will not negotiate with the company. The CFPB asserted that FDR's practice of occasionally securing consumer involvement in the settlement process and then collecting its fee when the consumer assists in, or secures, the settlement is an unfair and deceptive business practice because it deprives consumers of the "benefit of the bargain." The CFPB contended that the consumer's expectation is that the fee paid to FDR is in exchange for FDR doing the settlement work and, when the consumer becomes involved, there should be no fee. The last claim, the abusive claim, alleged that FDR "abusively" required consumers to negotiate debts on their own. The TSR claim alleged that the agreement with the debt settlement client failed to clearly and conspicuously disclose that the client could cancel the agreement and could obtain a refund, less the earned fees. The two deception claims stem from an alleged failure to disclose that some creditors would not negotiate with FDR and a misrepresentation regarding when FDR would impose a fee for its services. The lawsuit raised four counts: two for deception under the Consumer Financial Protection Act of 2010 ("Dodd-Frank"), one for a violation of the Telemarketing Sales Rule ("TSR"), and one under the "abusive" authority created by Dodd-Frank. The debt settlement industry received some "regulation by enforcement" in the wake of a settlement of the lawsuit filed by the Consumer Financial Protection Bureau ("CFPB") against Freedom Debt Relief, LLC ("FDR").
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