Debt Settlement Company Scams
This post on Reddit recently sums up my feelings about debt negotiation companies like Freedom Financial and others:
My Debt Settlement Nightmare
At AlanShore60607's request, here is my debt settlement experience. It's a long one.
In November 2019, I was just shy of 6 figures in credit card debt and while I was current with everything, I was drowning. I make low 6 figures but I had some really high balances ($20k+) so the minimum payments were huge and I couldn't get ahead. I went on Credit Karma looking into personal loan options as a way to consolidate some debts at a lower interest rate. I submitted requests to a few companies.
All of these companies responded to me but one was actually a debt settlement company based in Chicago called Monarch Legal Group. They claimed they could reduce my total payments and settle my balances for significantly less (up to 50%) than what was owed. My gut warned me but I ignored it - I was desperate.
Over the course of 2 years, I sent Monarch almost $1200 per month and I stopped paying my cards as they instructed me to do. Of course, late fees and collection activities started. They settled my first account (of 7 enrolled) almost a year into the program and it was for about 40% of what was owed. They don't pay the account outright - they enter into a payment plan with the creditor on the debtor's behalf.
Nothing much happened for about 7-9 months after that. I called a few times for an update and was given very vague responses. The portal was of no help. At one point, they told me that the person assigned to my case had left the company and I definitely had the impression that had I not called, my account would have been ignored.
Last summer, there was a knock at my door and I was served my first summons. I immediately called Monarch as one of the contract stipulations said they would represent me in any lawsuits. They told me to scan in the summons and upload to the portal and they would assign a lawyer. I did as instructed and the days went by with no word from Monarch. The court date was looming so I started calling them. I was given different lawyer's names and numbers each time I called. One wasn't even in the same state and had no affiliation with Monarch. I finally connected with the lawyer but on the same day, I received a notice of settlement reached with the creditor which the lawyer knew nothing about. This settlement did not provide any savings but I agreed to it to stop the lawsuit.
Shortly after that, they reached a settlement with a 3rd creditor and this time there was savings. So now I had 3 accounts in settlements and active payment plans. But 2 of the 4 remaining had large balances so I was concerned another lawsuit was looming. And I was right. In September, I received another summons from my largest creditor. I again scanned in the summons and this time I got a lawyer assigned right away. That lawyer told me that the previous lawsuit was still open and there was a judgement against me. He didn't know anything about the settlement reached but fortunately, I had the email trail. He got that taken care of. Another big miss by Monarch.
About a week after being assigned, the lawyer contacted me with a settlement offer. It was for more than I was paying in minimum payments when I signed with them and it would require me paying $900 more per month, which I could not do. The lawyer said they would garnish my wages and probably go after my house. Cue the panic. I started researching options and came to the conclusion that bankruptcy was my only option. I researched attorneys in my area and found one that had great ratings. We filed in November, had the 341 meeting in December and confirmed in January. I am in a 100% repayment plan and fortunately, I got a raise in December which instantly provided some relief. My attorney confirmed that since I was in a 100% repayment plan, the extra money was mine to keep. I just received a promotion and will get another nice bump in salary (don't know the amount yet). My goal is to pay the bankruptcy off in 3-4 years vs. the 5 planned.
Now it was time to go after this company to get some money back. When I cancelled, they only refunded what was in my escrow account at that time - about $2600. But I had paid them more than $28,000 over 2 years. They front load their fees which is why I didn't have enough in my account for the settlement. I don't think it's a coincidence that they front load the fees for the first 2 years of the contract as that is when the lawsuits start coming in. Around this time, I also learned about a law in Illinois focused on these companies and saw that they were in violation of it. In short, they paid themselves very well for work not performed.
I did some research about how to obtain a refund and came across this blog post - https://getoutofdebt.org/20126/how-to-try-to-get-refund-from-debt-relief-company. I followed the steps. I called to ask for a refund and was told the $2600 refund of the escrow account was the best I would get. I sent them a letter in early January where I detailed how much of a refund I wanted based on what was allowed with this law. The amount requested was $14,735. I told them that if I didn't receive the refund within 30 days of them receiving the letter, I would start filing complaints. I sent the letter certified mail so that I would have proof of receipt.
Of course they ignored it and so I did what I said I would do. I contacted a Consumer Law firm but they declined the case. I'm sure they assumed they wouldn't win but I'm really glad I didn't give up. I filed complaints with the Better Business Bureau (where they had their accreditation revoked due to similar complaints) IL Attorney General, FTC and National Consumers League. I also posted 1 star reviews on Google and Trust Pilot. I also reached out to personal contacts with the Cook County State's Attorney and the ABC news affiliate in Chicago.
The day after posting the review on BBB, they reached out to me and asked me to schedule an appointment to discuss. I did and spoke to a rep on Monday. This rep acknowledged that they missed a review after I cancelled where I should have received a refund. He said that management was reviewing my file and that he would know by today what amount they could refund. He said he was confident that they could reach the number requested or come very close. We had our follow up call today and they are refunding me the full amount. They need to send me an agreement to sign electronically (haven't gotten it yet) and the refund will be a bank draft. I immediately emailed my lawyer (who knew I was pursuing a refund and he had added it to the bankruptcy petition before confirmation). His assistant said not to spend any of it until he confirms with the Trustee. I am really hoping it will be treated the same as tax refunds or bonuses which are mine to keep. I can pay off a lease to own AC unit not included in the Trustee payments and free up ~$270 per month as well as build up significant savings.
For anyone who has been scammed by one of these companies, go after a refund. I am confident that if I didn't push it, they would have ignored it. It was only when I pushed that they took action. I do hope they are on the attorney general's radar and they get put out of business. If you are considering signing with a similar company, don't. It was the worst decision I've ever made. Try to negotiate settlements yourself, get a second job, use the debt snowball approach. Anything but them.
I hope this helps someone.
If you live in Southern California and have been taken advantage of by a debt negotiation company or a debt consolidation company - if you have been paying one of these companies and are not seeing any results - call me for the truth. I'll tell you everywhere they lied to you, and I'll give you an unbiased opinion of your options.
The Debt Freedom Attorney