When you are trying to clear your debt, the last thing you need to do is work with an ineffective debt settlement company. It not only paints you in a bad light, but you may also end up losing money that you would have otherwise used to repay the debt directly. Among such companies, you’re most likely to have heard of Freedom Debt Relief, which raises the question is freedom debt relief reputable?
Freedom Debt Relief Services
The company specializes in settling unsecured debts from credit cards, medical bills, unsecured personal loans, and many more. Ideally, your debt is paid in 2-4 years. In some cases, they have been known to help settle credit card debt for 50% or less than was owed.
However, they do charge a hefty fee, which can range between 15% and 25% of the debt. The average fee charged is 21.5%. You will also have to contend with a lower credit score as debt settlement typically lowers your credit rating.
How Does the Company Work?
After a free consultation with a Freedom Debt Relief review consultant, the company lets you know if you are eligible for its debt settlement program. You can also fill out an online form to request their services and evaluate your situation.
Once you engage the service, Freedom Debt Relief begins talks with your creditors to get them to accept a lower total payoff amount, in exchange for a one-time payment in full of the agreed-upon amount. These payments come from an escrow-like savings account into which you will deposit money, rather than paying your creditors directly.
The company will also notify you of the fee charged for their services based on your debt amount and location. Additionally, you will only be required to pay the cost after Freedom Debt Relief has negotiated your debt.
Are They Legitimate?
The company is a founding member of the American Fair Credit Council (AFCC) and a platinum member of the International Association of Professional Debt Arbitrators. Additionally, Freedom Debt Relief reviews show that they are rated above average compared to other debt settlement companies.
Is Debt Settlement Worthwhile?
There are some potential downsides to debt settlement to consider before signing up. These include:
Your Debt May Not Get Settled Fully: Some creditors do not negotiate with debt settlement companies and may instead sell the debt to a third-party collection agency or debt buyer. It may impede your ability to settle the debt.
Forgiven Debt May Still Be Taxed: Some creditors send a Cancellation of Debt form 1099-C to the IRS, notifying them of the cancellation. The IRS will then tax your forgiven debt. There is an exception if you are insolvent at the time, you settle debts with your creditors.
You May Still Get Persistent Calls from Debt Collectors: The debt settlement may help you resolve things with your creditor, but it will anger the debt collector as it denies them a chance to earn money from collecting your debt. When this happens, you are advised to direct all communications to the company.
You may have read the Consumer Financial Protection Bureau sued the company in 2017. The bureau alleged Freedom Debt Relief charged clients without settling their debts as promised, made them negotiate their settlements, and misled consumers about its fees. The company settled the case in July 2019 and paid $20 million in restitution to affected consumers alongside a $5 million civil penalty.
In light of the lawsuit, you may be wondering if Freedom Debt Relief is reputable. The answer is yes. Judging from all the debts the company has helped settle over the years, there is no denying the fact it delivers.
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