The Consumer Financial Protection Bureau (CFPB) announced Friday (Jan. 19) that it has launched a lawsuit against Strategic Financial Solutions (SFS), charging it with running an illegal debt-relief business.
SFS markets itself as a provider of debt-relief services and uses shell companies and facade law firms to advertise to consumers, according to the release.
The regulator and seven state attorneys general sued SFS and its affiliated companies, filing the suit under seal on Jan. 10. The CFPB said SFS uses third parties to target financially vulnerable consumers via advertisements, per the release. They also sued the companies’ chief architects, Ryan Sasson and Jason Blust.
SFS did not immediately respond to PYMNTS’ request for comment.
“The operators of this scheme established a network of shell companies and law firms to hide their illegal activities from law enforcement,” CFPB Director Rohit Chopra said in the release. “The CFPB and state attorneys general are seeking to shut down this outfit’s illegal activity.”
The suit alleges that SFS collected hundreds of millions of dollars in fees that were exorbitant and illegal and targeted vulnerable consumers, according to the press release.
The company and the entities it controls run advertisements telling consumers they may qualify for loans to pay down debts, discusses those loans with consumers over the phone, tells most they do not qualify for the advertised loans and then encourages them to enroll in its debt-relief services, the release said.
SFS provides little, if any, such services, but collects fees from an escrow account it requires customers to pay into, per the release. The firms have collected over $100 million from consumers since 2016.
The suit asks the court for a stop to SFS’ actions, redress for consumers and a civil money penalty, according to the release.
The seven states filing the suit with CFPB are Colorado, Delaware, Illinois, Minnesota, New York, North Carolina and Wisconsin, the release said.
The CFPB said that a court granted its request for a temporary restraining order against SFS on Jan. 11. The agency had filed a complaint and requested the temporary restraining order on Jan. 10.
In an earlier case having to do with debt relief, the CFPB said in May 2022 that it finalized an enforcement action against two payment processors working with debt relief, over collecting debt-relief fees from consumers and lying about the specifics. The regulator fined the defendants over $11 million.