Lawsuit targets Buffalo-based debt-relief company

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The federal Consumer Financial Protection Bureau (CFPB) and attorneys general in seven states, including New York, have sued Buffalo-based Strategic Financial Solutions (SFS) and dozens of shell companies in U.S. District Court for allegedly running an illegal debt-relief enterprise.

The state and federal authorities also are suing Ryan Sasson and Jason Blust, labeled as the chief architects of the illegal enterprise that has collected hundreds of millions of dollars in exorbitant, illegal fees from vulnerable consumers, according to CFPB officials.

The lawsuit seeks to stop the illegal actions, repay clients, and impose civil penalties.

The other plaintiff states are Delaware, Illinois, Minnesota, North Carolina, and Wisconsin.

“The operators of this scheme established a network of shell companies and law firms to hide their illegal activities from law enforcement,” the suit claims.

On March 4, U.S. Magistrate Judge Michael J. Roemer issued a temporary restraining order that froze the defendants’ assets, halted their operations, ordered the preservation of records, and appointed a temporary receiver for the defendant firms.

The defendants have moved to stay the TRO pending an appeal, and some of the individual firms have challenged the appointment of a receiver.

“People can fall into debt, but New Yorkers — and all Americans — should not face even greater financial hardship when they attempt to seek help,” New York Attorney General Letitia James said in a news release.

“SFS, Sasson, and Blust preyed on hardworking consumers and charged illegal fees to unjustly enrich themselves and their business. Let this lawsuit serve as a warning to all who would follow in their footsteps. We can and will use the full force of the law to stop predatory schemes and protect consumers,” she said.

“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,” Colorado Attorney General Phil Weiser said in a news release.

Strategic Financial Solutions markets itself as providing debt relief services. It has offices in New York City and Buffalo. Sasson is the chief executive officer of SFS, which sits at the top of a web of shell companies and façade law firms controlled by Sasson and Blust, CFPB officials said.

The alleged scheme involves dozens of entities, to dupe consumers and regulators. The company uses third parties to target financially vulnerable consumers with advertisements. The advertisements lead consumers to believe they may qualify for loans to help pay down debts.

SFS tells most, if not all, consumers that they do not qualify for the advertised loans but encourages consumers to enroll in its debt-relief services. SFS promises that its network of law firms and lawyers will negotiate lower debt amounts, according to the complaint.

SFS provides little, if any, debt-relief services. Customers are required to make payments into an escrow account. Long before and debts are settled, SFS collects the fees from the escrow account, the suit claims.

The lawsuit claims the actions of SFS violate the Telemarketing Sales Rule. The lawsuit also alleges violations of New York and Wisconsin state laws.

Specifically, the complaint alleges that SFS harms consumers by:

• Charging illegal advance fees. Since 2016, SFS and its façade firms have collected over $100 million from consumers before any debt-relief payments to these consumers’ creditors.
• Falsely claiming lawyers will provide debt relief, but the SFS and its employees, who are not lawyers, conduct the debt-relief negotiations, if any take place.

Under the Consumer Financial Protection Act, the CFPB has the authority to take action against nonbank financial institutions, including debt-relief companies, for violating consumer financial protections laws and rules, including the Telemarketing Sales Rule.

The lawsuit seeks to stop the unlawful conduct, make harmed consumers whole again, and require SFS to pay a civil penalty, which would be deposited in the CFPB’s victims’ relief fund.

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