SEATTLE (Legal Newsline) - Washington Attorney General Rob McKenna announced on Thursday that his office has reached an $800,000 settlement agreement with a debt relief company that allegedly violated the state's Consumer Protection and Debt Adjusting acts.

Freedom Debt Relief allegedly collected more money from Washington consumers than is allowed under state law.

"We're paying special attention to operations that take advantage of people who, due to this tough economy, are already struggling to put food on the table and keep the lights on," McKenna said.

"Failing to inform customers that their credit may be ruined and taking illegal fees-when those individuals are making a good-faith effort to settle their debts-are practices that we aim to stop."

The company claims to have settled more than $1 billion in debt for customers across the country through a several step process.

Under state law, Washington's Debt Adjusting Act caps the fee that a debt settlement company may charge at 15 percent of the total enrolled debt. Freedom Debt Relief allegedly charged consumers more than that in many cases, McKenna claims. It also allegedly collected its fees before the time permitted by the statute and didn't adequately inform various consumers about the true nature of how the program works.

Approximately 1,100 consumers from Washington, collectively owing $35 million in debt, have signed up with Freedom Debt Relief since 2003. It is believed that over 570 of those that did are eligible for some sort of restitution.

No new Washington customers have been allowed to enroll with the company since March 2009 when a private class action lawsuit was filed against it. That case is still pending in U.S. District Court.

Under terms of the settlement, the company may not take on any new Washington clients without first notifying the attorney general's office. It is allowed to continue to negotiate debt settlements for anyone currently enrolled in its program.

Freedom Debt Relief agreed to the restitution program and to comply with certain restrictions on how it conducts business, even though it said its business model shouldn't be held to those standards.

More News