UPDATE 1-Freedom Debt Relief pays $25 mln to settle U.S. charges it misled consumers

(Adds Freedom Debt Relief policy changes, settlement details, allegations, case citation, byline)

July 9 (Reuters) - Freedom Debt Relief LLC, the largest U.S. debt settlement services provider, agreed to pay $25 million to resolve U.S. regulatory allegations it imposed improper charges on consumers and failed to settle their debts as promised.

The U.S. Consumer Financial Protection Bureau said on Tuesday that Freedom will pay a $5 million civil fine and $20 million of restitution to settle its lawsuit. It also entered a related consent order with the Federal Deposit Insurance Corp.

Freedom did not admit or deny wrongdoing in the settlement, which also resolves claims against Andrew Housser, the San Mateo, California-based company’s co-founder and co-chief executive. Court approval is required.

Freedom, part of the Freedom Financial Network, said it will change some policies and disclosures in connection with the settlement and worked with the CFPB to address its concerns.

Debt settlement companies negotiate with creditors to persuade them to accept less money than they are owed.

Freedom said in February that it has negotiated more than $10 billion of consumer debt and enrolled over 600,000 clients.

The CFPB had accused Freedom of misleading consumers about creditors’ willingness to negotiate, charging fees after having consumers negotiate their own settlements and falsely claiming it charged fees only on debt settlements it negotiated.

It also accused Freedom of failing to tell consumers they could reclaim money deposited in their accounts if they exited their debt settlement programs.

The CFPB said Freedom’s actions violated the 2010 Dodd-Frank financial reform law and a federal telemarketing law.

Freedom typically charged fees between 18% to 25% of what consumers owed on the day they signed up, according to the CFPB.

The CFPB had sued Freedom and Housser in November 2017 under the agency’s director at the time, Richard Cordray.

The case is Consumer Financial Protection Bureau v Freedom Debt Relief LLC et al, U.S. District Court, Northern District of California, No. 17-06484. (Reporting by Jonathan Stempel in New York; Editing by Chizu Nomiyama and Dan Grebler)