November 22, 2005
GENERAL’S OFFICE SETTLES WITH CREDIT
COUNSELING AGENCY THAT TARGETED SPANISH SPEAKERS
General J. Joseph Curran, Jr. announced today that his Consumer
Division has entered into a settlement with
Financial Freedom International, Inc., a Nevada-based credit counseling
agency. Financial Freedom, through a licensee located in Montgomery
County called Financial Freedom of Washington (aka New Freedom
Corp.), offered credit counseling services and debt management
services to consumers. Financial Freedom sold debt management services
to consumers living throughout Maryland, but it primarily targeted
Spanish-speaking residents of Montgomery and Prince George’s
Counties through Spanish language radio, television and print advertisements
that claimed Financial Freedom could reduce consumers’ monthly
payments to their creditors.
Maryland, only a nonprofit corporation can offer and sell debt
services. Debt management services are provided when
a credit counseling agency receives monthly payments from consumers
for the purpose of distributing the funds to consumers’ creditors
at a lower monthly rate negotiated by the credit counseling agency.
The Division alleged that Financial Freedom, as a for-profit corporation,
could not offer and sell the debt management services it offered
and sold to consumers from 2000 to 2004. The Division also alleged
that Financial Freedom misled consumers by failing to inform them
that enrolling in a debt management plan could harm their ability
to obtain consumer credit and by failing to inform them that the
initial payments they made to enroll in the plan would not be forwarded
to their creditors. Instead, the initial payments were used to
pay Financial Freedom and its licensee. Financial Freedom denied
that it had violated Maryland law.
the settlement the Division reached with Financial Freedom, the
not to sell debt management services to Maryland
consumers unless it first obtains a license to sell debt management
services from the Maryland Department of Labor, Licensing and Regulation.
Under the Debt Management Services Act, only a nonprofit corporation
may be licensed to perform debt management services. Financial
Freedom’s licensee went out of business several years ago
and is not a part of the settlement.
Under the settlement, Financial Freedom also agreed to return
the portion of the fees consumers paid for debt management services
that it received. The Division estimates that more than 700 consumers
will be receiving refunds that, in total, will exceed $200,000.
The company also agreed to pay the Division $15,000 in costs and
a $50,000 penalty, which increases to $150,000 if Financial Freedom
breaches the settlement. Financial Freedom also agreed not to misrepresent
its services, including its ability to provide services that it
cannot lawfully perform.
Maryland law requires credit counseling agencies to be nonprofits
to ensure that they serve the consumers’ needs rather then
the company’s profits," Curran said. "I am pleased
that this settlement will provide restitution to consumers who
experienced financial difficulties." The Attorney General
also expressed his gratitude to the Montgomery County Office of
Housing and Consumer Affairs, which assisted his Consumer Protection
Division in conducting its investigation.
Consumers who have complaints about debt management companies
may contact the Consumer Protection Division by calling (410) 528-8662
or the Commissioner of Financial Regulation at (410) 230-6100.