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ConsumerWatch: Couple Gets Little Help From Debt Settlement Company

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(CBS)

(CBS)

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SAN FRANCISCO (CBS 5) – A Tri-Valley couple who turned to a popular debt settlement company based here in the Bay Area for help says they’re now worse off than when they started.

Sherry and Joe Theriault racked up more than $20,000 in debt several years ago, when they started relying on two different credit cards to pay their rent and other bills. But paying off those credit cards was difficult. And in January 2010, the couple signed up with Freedom Debt Relief, a company they’d seen advertised on television and radio.

“The way it was laid out, it sounded like it was going to be good,” Sherry Theriault told ConsumerWatch. “We had a hope of being debt free, of making a fresh start.”

But the Theriault’s said that fresh start came with a steep price. The company charged an up-front fee of $3,290, a practice that is now illegal.

And how was Freedom Debt going to help the Theriaults deal with their debt? The Theriaults said the company’s representative told them the first step was to stop paying their credit card bills.

“We were told to stop paying our credit cards while the interest kept growing,” Sherry Theriault said. Freedom Debt Relief’s attorney denies the couple was told not to pay their bills.

The Theriaults said they were told instead of paying their bills they should deposit $401 a month into a dedicated account in their names. The way the Theriaults understood the agreement with Freedom Debt Relief, once the balance in the account reached a certain amount, Freedom Debt Relief would use that money to negotiate with their creditors.

But a year into the agreement with Freedom Debt Relief, the Theriaults got a call from Chase, one of their two creditors.

“They contacted us and said ‘we will not deal with Freedom Debt,’” Sherry Theriault recounted.

Chase sent ConsumerWatch a statement confirming it “does not work with debt-settlement companies.” 

The company said it will work with non-profit credit counseling agencies.

 Bob Linderman, an attorney for Freedom Debt, said the company’s contract clearly states it cannot force banks and creditors to negotiate. He told ConsumerWatch some banks are more willing to make deals than others. He also said the company has a good success rate, but regrets how the Theriault’s situation turned out.

“Frankly, it’s an embarrassment to us,” Linderman said.

Over the summer, the Theriault’s settled with Chase on their own. But their other creditor, Capital One, is now taking them to court. And their $10,000 debt with that company has now ballooned to $14,000.

“I’m worse than I was a year and a half ago,” Sherry Theriault said.

After ConsumerWatch got involved, Freedom Debt Relief refunded the Theriaults their $3,290 fee.

According to the Better Business Bureau’s website, last year, the Washington State Attorney General entered an agreement with Freedom Debt Relief. Under the terms of the deal, Freedom Debt Relief agreed to refund former and current customers $742,613 for fees paid in connection with debts that weren’t settled or are not in active negotiation programs. Freedom Debt Relief did not admit any wrongdoing.

The Federal Trade Commission offers advice for consumers in debt.

(Copyright 2011 by CBS San Francisco. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)

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