Debt relief company must pay

A West Coast debt consolidation business that officials say overcharged several hundred South Carolina residents will return $839,000 to those customers by the fall.

Freedom Financial Management Inc. of California agreed to the refunds recently to settle a case with the S.C. Department of Consumer Affairs, which said the affected customers paid excessive fees for credit counseling services.

The deal marked the single largest recovery by the agency from an out-of-state company.

"Critics of the credit counseling law stated that the department would be unable to go across state lines and recover funds for South Carolinians, but our diligence is paying off," said Brandolyn Thomas Pinkston, the department's administrator, in a statement.

Freedom Financial Management could not be reached Friday for comment.

South Carolina's credit counseling laws, considered some of the strictest in the country, require that debt consolidators obtain a license and limit the fees a company can charge. For example, a counseling firm can't charge more than $50 for an initial consultation.

Financial Freedom was not licensed, according to Consumers Affairs.

Also, it charged monthly fees in excess of what's allowed under the S.C. Credit Counseling Act and took a percentage of a customer's debt payments, said Carri Grube Lybarker, staff attorney at the state agency.

Those individuals were "paying fees when this money could have been paying off their debt," she said.

In one case, Financial Freedom charged an unidentified resident more than $29,000. That person along with 362 South Carolinians should get checks in the mail by Oct. 11 for the amount they were overcharged.

Most people paid between $1,000 and $2,000 too much, Grube Lybarker said.

"It's great news especially because these people were having financial difficulty in the first place," she said.

The allegations of excessive fees stemmed from individuals who signed contracts with Freedom Financial after Dec. 1, 2005, the department said.

Consumer Affairs recommends that residents who are seeking debt relief try to negotiate with their creditors themselves. If they need professional help, the agency can provide a list of 37 companies or organizations that have obtained the proper license to negotiate debts on behalf of South Carolina residents.

Since the state's credit counseling laws were strengthened in late 2005, the agency said it has recovered more than $2.5 million for consumers.

Reach Katy Stech at 937-5549 or kstech@postandcourier.com.