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Freedom Debt Relief Review 2023

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Freedom Debt Relief Review 2023

By NerdWallet Follow NerdWallet’s social media for updates

Dec 20, 2022

Written by Kathy Hinson Lead Assigning Editor Personal finance, credit scoring, financial management and debt Kathy Hinson leads the core personal finance team at NerdWallet. In the past, she worked for 18 years at The Oregonian in Portland in positions such as copy desk chief and team leader for design and editing. Her previous experience includes news and copy editing for many Southern California newspapers, including the Los Angeles Times. She graduated with a bachelor’s in journalism and mass communications from the University of Iowa.

The majority or all of the products we feature are from our partners who pay us. This impacts the types of products we feature and the location and manner in which the product is featured on the page. However, this does not influence our evaluations. Our opinions are entirely our own. Here is a list of and .

Freedom Debt Relief, a company that provides debt settlement services that negotiates with creditors to reduce the amount of debt you are obligated to.

It’s one of the many solutions to help with debt that consumers can avail. It is important to think about whether you’re eligible for other debt relief options and then compare costs. Also, think about the possibility that Chapter 7 bankruptcy might wipe off more debts, and more quickly.

In this article:

The Way Freedom Debt Relief Works

How do you qualify?

Freedom offers assistance to customers with debts from medical bills, credit card debt as well as personal loans as well as private student loans and other kinds of unsecure debt. Generally, you must have a minimum debt amount of $7500 to be eligible, however some states have laws setting higher minimums.

As with other debt relief firms, Freedom cannot help clients who have debts that require collateral, like an auto or mortgage loan. Freedom also is unable to address debt that is a result of federal student loans.

A typical new customer has an average of $23,000 in unsecured debt across eight to nine credit accounts when they enroll with Freedom, says Sean Fox, the company’s co-president. The amount of debt that is unsecured could be from $100,000 to greater, with some clients have more than 20 credit accounts, Fox adds.

The debt settlement process

Go online or call to do an evaluation of your debts and potential eligibility with an Freedom representative. After that, you’ll receive a program overview call, which outlines the program for settlement and will be given the agreement as well as disclosures that you need to take a signature. That’s followed by an onboarding phone call.

When you have enrolled debts into this plan, you cease paying for the accounts you have enrolled. Instead, you create a dedicated account to hold payments for creditors. You’ll own and control the account and deposit monthly payments into it. Freedom will work with you to determine the amount that will be monthly deposited into your account. The amount is determined by your capacity to pay as well as the amount of your total debt enrolled, as per the company.

If you do not pay a creditor, you become delinquent on the account. You accrue late fees and interest charges plus your credit rating will drop. Incomplete accounts remain on your credit reports over a period of seven years.

As money accrues in the account that is dedicated, Freedom begins negotiating with the individual creditors on your behalf, in order to negotiate with them for lesser than the amount you are owed. The concept is that after several months of insufficient payment the creditor will be inclined to accept the lower sum rather than risk getting nothing at all.

If a creditor accepts the lower amount as a payoff and you agree to pay the creditor, either a lump sum or in installments, from your dedicated account. You also then pay an additional fee for Freedom Debt Relief for its service.

Cost

According to laws, Freedom cannot charge upfront fees; rather, it collects an amount whenever a settlement has been reached with a creditor and you have ratified it and paid at least one payment on it.

The fee ranges between 15% and 25%; it’s based on the amount of the enrolled debt and can vary based on the state’s regulations. A customer who is able to settle a credit card balance for $3,000, for instance, will pay between $750 and $1,250 to Freedom for the service.

There’s also a one-time fee of $9.95 to establish the special-purpose account. There’s also an annual fee of $9.95 which covers account maintenance, Fox says. These fees are charged by the host company of the account, not by Freedom.

Time frame

Freedom claims that most customers will receive their first settlement within three months, but it can take longer depending on the amount you save every month, the amount of accounts enrolled in the program, as well as the amount owed on each account. Freedom states that customers who are committed to timely monthly payments to their designated accounts pay off all outstanding debts within two to four years, on average.

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Freedom Debt Relief at a glance

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What to be aware of concerning Freedom Debt Relief

Reliable to complaints of customers

Freedom has an A+ rating on the time of writing . The company has received over 350 customer complaints in the past three years, including complaints about issues with its services and issues with billing and collection. Notably, the business has a 100% response rate for customer complaints via the BBB.

Lawsuit

In 2017, the company was accused of being sued by the Consumer Financial Protection Bureau, in which the firm was accused of charging customers without paying their debts in the manner it was promised, made them negotiate their own settlements and misled customers about its charges.

In July, Freedom settled the CFPB lawsuit , accepting that it would pay $20 million in compensation to consumers affected and the civil penalty of $5 million. (zero) Consumer Financial Protection Bureau . . Accessed Nov 12 20th, 2020.

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The risks of the process of debt settlement

The risks and drawbacks associated with debt settlement include:

It can affect your credit score

If you’re forced to stop making payments on outstanding debts in order to join the debt settlement program the accounts will show as delinquent to your credit records. Your credit scores will take a significant hit which could impact future credit applications, and even employment. Delinquent accounts are those that have been in the bank over a period of seven years as do loans that charge off accounts.

The odds of success aren’t always certain.

Certain creditors might offer to sell the debt you owe to a third party collection agency or debt buyer. Freedom claims it works with the third party and will coach its clients to resolve their debts directly with creditors, but results will vary.

The interest and fees build up

During the time you’re in an agreement to settle your debt, you’ll accrue additional interest and late fees on your debt. If you don’t remain with the program enough to complete it, or if Freedom does not negotiate a settlement, you’ll be left with the greater balance.

You could still get a call from debt collectors

When you cease paying your account, you may experience aggressive collection efforts, or even legal action from creditors. Freedom advises its customers to inform creditors that they’re working with the settlement firm and transfer documents to Freedom via their personal online dashboard.

The forgiven debt could be taxed

Because the IRS accepts forgiven debt as taxable income It’s possible that you’ll have to pay taxes on the debt you didn’t have to pay once you settled. Certain creditors will mail a Cancellation of Debt form . A possible exception is if you’re insolvent (have more debt than assets) when you settle your debts with your creditors.

Speaking with a tax professional or lawyer for further guidance is recommended.

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Freedom Debt Relief vs. other alternatives

Before settling on a debt settlement option consider other options, including debt payoff , and other options:

Debt management plan

This is a possible option for someone who has an income that is steady enough to pay off credit card debts in three to five years. You’ll pay a nonprofit credit counseling company to reduce your debts to one payment per month at a reduced interest rate. However, you won’t have access to new credit or the ability to utilize your credit cards until the time of payoff.

Consolidation of debt

If you opt for this option, you’ll transfer multiple debts into one new one, typically through the account that allows you to transfer balances or . The new debt should carry an interest rate lower than your old debts which could help you get rid of your debt quicker. But it often requires good to excellent credit for approval or good conditions.

Bankruptcy

The bankruptcy process can help you pay off your debt while protected by a federal court. will typically erase most non-secured debts within between three and six months, however it is not for everyone. If you’re delinquent on debt, filing for bankruptcy will stop you from receiving calls from creditors and lawsuits filed against you. Your credit may take a hit, like debt settlement however research suggests that credit scores can rebound within a year.

DIY debt settlement

You can pick up the phone, call your creditors and discuss the matter with them on your own. Similar to using a debt settlement service the odds of success aren’t 100 however it can save you time and money.

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