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In Response to Lawsuit by State of California, Freedom Debt Relief (FDR) Vows to Fight for the Industry

Jan 23, 2009

TASC, the leading industry association, defends debt settlement practices in California and will file Amicus Brief supporting FDR’s Position

In response to a complaint from the State of California Department of Corporations (DOC) and the District Attorney of the County of San Mateo, Calif., Freedom Debt Relief, LLC, announced its intention to vigorously defend its practice of debt settlement in California.

The DOC and the County of San Mateo filed suit against FDR and certain of its affiliates in October, alleging that FDR’s business practices violate certain provisions of the California Financial Code. Specifically, the DOC has alleged that FDR is a “prorater,” a classification historically applied to bill payers, credit counselors and similar enterprises. On December 3, FDR and its affiliates filed an answer to the state’s complaint denying all allegations.

“We have carefully examined the allegations made by the Department of Corporations are convinced that FDR is not a prorater,” says Andrew Housser, FDR’s co-CEO, in response to the lawsuit. By definition, he explained, a prorater must, among other things, receive money for the purpose of distributing the money among creditors – “which FDR does not do under any circumstances.” FDR provides consumer debt resolution services, working for the consumer to negotiate with creditors and lower principal balances due.

Housser noted that FDR was one of the first debt settlement enterprises in the country to adopt the strict customer protection guidelines of The Association of Settlement Companies (TASC); INSERT INTO AMP_industrynews (Title, DateSubmitted, Body, brief) VALUES which strictly prohibits custody or control of consumer funds. “We believe fighting this lawsuit is not only about defending our company, but also about standing up for the entire debt settlement industry, which represents hundreds of business, tens of thousands of employees and hundreds of thousands of consumers. The Department’s position threatens thousands of California jobs - jobs that are specifically designed to help California residents who have severe financial problems.”

TASC itself intends to file an amicus brief in California Superior Court in support of FDR’s position, according to Chris Kesterson, president of TASC. “We believe that the prorater law, as written, is not applicable to debt settlement companies following the TASC consumer protection guidelines,” he says. “The Department of Corporations’ position, if upheld, would effectively take away an option that for many consumers is a cost-effective and efficient debt resolution alternative to personal bankruptcy at a time when consumers need this alternative more than ever.”

“Since we founded FDR in 2002, we have successfully settled more than $300 million of consumer debt and, in the process, have helped more than 50,000 consumers manage otherwise-crippling debt burdens,” Housser continues. “We are extremely proud of our work and look forward to defending ourselves, and our industry, against what we believe are totally unfounded charges.”