CFPB, 7 state AGs sue firm that allegedly collected more than $100 million from consumers in illegal, up-front fees for debt relief services

A firm called Strategic Financial Solutions (SFS), its shell companies and two key architects of a scheme that amassed the firms allegedly more than $100 million in illegal advance fees from consumers are being sued by the federal consumer financial protection agency and seven state attorneys general, the agency said Friday.

The suit, filed under seal Jan. 10 by the Consumer Financial Protection Bureau (CFPB) and the AGs for Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin, want the court to, among other things, order a stop to the illegal actions, order redress for consumers, and award the CFPB and states civil money penalties.

The bureau said the firms have engaged in a scheme in which borrowers are enticed to apply for loans to pay off their debt but most often are told they don’t qualify for the loans and are directed to the firm’s debt relief services, with pre-determined fees usually charged in advance of any work on the sought-after debt relief. Fees are drawn from escrow accounts that the consumers are required to establish at the outset. The bureau said the firms collected more than $100 million in the fees since 2016 under their scheme.

The suit alleges that SFS and other parties have violated the federal Telemarketing Sales Rule and state laws in New York and Wisconsin. Besides charging the prohibited advance fees, the suit states that SFS leads consumers to think that contracted law firms will negotiate lower payoff amounts. “However, the firms serve as a façade, and SFS and its employees, who are not lawyers, conduct the debt-relief negotiations, if any take place,” the CFPB said in its release.

“SFS provides little, if any, debt-relief services,” the bureau said. “SFS requires customers to make immediate payments into an escrow account. Long before it settles any debts, however, SFS collects the fees from the escrow account. While the illegal fees and false claims of legal assistance leave consumers worse off, [Ryan] Sasson and [Jason] Blust pad their pockets through their web of shell companies that siphon the fees from the escrow accounts.”

Sasson, SFS’s chief executive, and Blust control the firm’s shell companies and façade law firms and are the chief architects of the scheme, the bureau said. It said SFS has offices in New York City and Buffalo, New York.

CFPB and Seven State Attorneys General Sue Debt-Relief Enterprise, Strategic Financial Solutions, for Illegally Swindling More Than $100 Million from Financially Struggling Families