Debt Relief Firm Sued By CFPB, Seven States, Over Alleged Swindling of $100 Million – Forbes Advisor – Earn Charter

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Federal regulators and seven states are suing a New York-based debt relief company, claiming it bilked financially struggling customers out of more than $100 million in illegal and exorbitant fees without actually providing any debt relief.

The Consumer Financial Protection Bureau and the attorneys general of Colorado, Delaware, Illinois, Minnesota, New York, North Carolina and Wisconsin have filed a lawsuit against Strategic Financial Solutions, known as SFS, and its network of shell companies.

The CFPB and attorneys general are also suing company CEO Ryan Sasson and Jason Blust, whom they identify as “the chief architects of the illegal enterprise.”

“Consumers who were struggling financially and may well have been desperate to reduce their debts turned to the defendants for help. Instead, they were exploited, leaving them even worse off,” said Attorney General Phil Weiser of Colorado in a news release.

Representatives of SFS have so far not commented.

Suit Alleges Customers Lured With Promise of Loans

The lawsuit alleges that SFS advertised debt repayment loans that were largely a bait-and-switch.

It claims that most consumers who called to ask about a loan were told—by someone who wasn’t an attorney—that they didn’t qualify. SFS then allegedly encouraged callers to enroll in its debt relief service, promising legal assistance in negotiating lower debt amounts through a network of law firms.

The suit claims customers were required to make immediate payments into an escrow account, from which SFS and its “facade firms” collected fees long before settling any debts.

Company Accused of Violating State and Federal Laws

The CFPB and attorneys general allege that SFS violated the federal Telemarketing Sales Rule and state laws in New York and Wisconsin through the following tactics:

  • Illegally collecting fees in advance. The lawsuit accuses SFS of charging illegal fees before settling consumer debts.
  • Deceptive claims of legal assistance. SFS allegedly deceives consumers by falsely asserting that contracted law firms will handle debt relief negotiations—but in reality, these firms are a facade. Instead, the suit claims, SFS and its non-lawyer employees conduct any debt-relief negotiations that may occur.

The lawsuit seeks to halt the allegedly illegal activity. It also asks for damages and legal fees, and to bar the defendants from having an ownership stake in any debt relief companies in the future.

What To Know Before Hiring a Debt Relief Company

Debt settlement companies negotiate with your creditors to lower your debt so you can afford the monthly payments or make one manageable lump-sum payment.

Consumers can contact their creditors on their own to negotiate lower payments, but for this to be effective, usually the debt must be in default, or there must be several months of late or no payments.

Before you work with a debt settlement company, do some research. Read reviews online, find out how they plan to lower your debt and determine how much it will cost.

Here are two warning signs that a debt settlement company is a scam:

  • It demands upfront payments. This is against the law.
  • It guarantees debt forgiveness. There’s no certainty the creditors will lower the amount of debt.

Find The Best Debt Settlement Companies Of 2024

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