The Consumer Financial Protection Bureau, in partnership with the Attorneys General of seven states, have filed suit against a debt relief operation and a web of shell companies that are accused of collecting hundreds of millions of dollars in illegal fees from consumers. The regulators are also seeking a temporary restraining order to keep the companies from operating while the suit is pending.
The Who: Joining the CFPB in the suit are the Attorneys General of Colorado, Delaware, Illinois, Minnesota, New York, North Carolina, and Wisconsin.
- The architects of the scheme are Ryan Sasson and Jason Blust. They controlled Strategic Financial Solutions and more than two dozen subsidiaries.
- Approximately 34,000 consumers were enrolled in the scheme during a five-year period, paying more than $100 million in fees to the defendants.
The What: The defendants target financially vulnerable consumers with advertisements promising loans to help consumers pay down their debts. During conversations with consumers, SFS representatives inform consumers that most, if not all consumers, do not qualify for the advertised loans. The representatives then direct the consumers to the company’s debt relief services.
- After requiring consumers to make payments into an escrow account, SFS collects those fees and pockets them, rather than perform any debt relief services, according to the complaint.
- The defendants are accused of violating the Telemarketing Sales Rule by charging illegal upfront fees and falsely claiming that lawyers will provide debt relief services.
- Consumers were told that they needed to accumulate at least 25% of the amount that was owed before the defendants would make a good-faith estimate to settle a debt with a creditor. But the fees that were being extracted every month were so high that most consumers were not able to accumulate that much money into their accounts.
The When: The defendants have been operating the scheme since January 2016, according to the complaint.