Strategic Financial Solutions Shut Down Amid Lawsuit

Strategic Financial Solutions, a financial services firm with 264 employees in the Buffalo area, has been shut down as the result of a civil case brought by a federal consumer protection agency, in conjunction with seven states’ attorneys general.

Strategic Financial Solutions is aiming to reopen its operations, pushing back in federal court against the suit filed by the Consumer Financial Protection Bureau in conjunction with the seven attorneys general, including New York State Attorney Letitia James.

“(The company) tricks consumers into paying exorbitant fees by claiming that the company’s network of law firms will negotiate down their debts, but most work is done by non-attorneys,” the New York State Attorney General’s office said in a statement. “Since 2016, (Strategic) has swindled thousands of financially vulnerable consumers out of more than $100 million.”

A lawyer for the company denied those claims. Strategic Financial Solutions is based in New York City and expanded to Amherst in 2017, with the goal of eventually employing 1,500 people.

The government last week secured a temporary restraining order and the appointment of a receiver to take control of the company. Dennis Vacco, an attorney for Strategic Financial Solutions, said those steps were taken without giving the company a chance to tell its side in court. The receiver shut down Strategic Financial Solutions’ operations on Jan. 12.

“(The receiver) has shut down bank accounts, frozen employees out of Strategic’s IT systems, cut off all access to email, refused to provide service to Strategic’s law firm clients,” Vacco said in a court filing. “In general, the receiver has taken every step possible to ensure that Strategic cannot function. In short, the receiver is not managing Strategic, he is killing it.”

Vacco is asking U.S. District Judge John L. Sinatra Jr. to dissolve the temporary restraining order and remove the receiver, to enable the company to resume operations.

James said the plaintiffs are seeking to stop Strategic Financial Solutions “from illegally operating and are asking the court to order damages, penalties, and restitution for impacted consumers.”

The lawsuit also targets Ryan Sasson, the CEO of Strategic Financial Solutions, and Jason Blust, who James said controlled the law firms that contracted with the company.

“The operators of this scheme established a network of shell companies and law firms to hide their illegal activities from law enforcement,” said CFPB Director Rohit Chopra. “The CFPB and state attorneys general are seeking to shut down this outfit’s illegal activity.”

Strategic Financial Solutions is a debt relief firm, not a debt collection firm. The company provides administrative services to law firms that retain clients seeking to settle debts. Strategic Financial Solutions sets up standalone entities to work with those law firms, Vacco said.

Vacco said last week’s shutdown has left Strategic Financial Solutions’ employees in limbo, and has disrupted the debt settlement cases of 65,000 clients of the law firms that Strategic Financial Solutions provides services to.

The lawsuit claims that Strategic Financial Solutions “collects illegal advance fees before settling any debts, leaving many consumers worse off than when they entered the program.”

The government’s complaint claims the company “targets financially vulnerable consumers and their families with misleading advertisements that trick them into believing they qualify for loans to pay down their debts.

“When consumers call the advertised number seeking help, (Strategic Financial Solutions) employees typically instead tell consumers that they do not qualify for the advertised loan,” the complaint said. “The employees then persuade consumers to enroll in the company’s debt-relief services with the promise that its network of purported law firms will negotiate lower debt amounts.

The complaint claims the company instructs consumers to stop paying their creditors, “which can lead to creditors charging additional interest and fees and can have a significant negative impact on their credit score. Consumers are told to make payments into an escrow account.”

The suit says notaries were sent to meet face-to-face with clients before agreements were signed, and contends those meetings were “typically brief and non-substantive,” with the notaries often lacking knowledge of what they were presenting.

Vacco said the CFPB and the attorneys general are incorrectly targeting Strategic Financial Solutions, because the company did not arrange the notary meetings, and did not collect the advance fees.

Terrence Connors, who is representing law firms that work with Strategic Financial Solutions, said the meetings were instead arranged by the law firms, who sent trained notaries to consumers’ homes.

And Connors claimed the in-person meetings were thorough, typically lasting about 45 minutes, and that the consumer and notary both signed an affidavit at the conclusion of the meeting.

Vacco said the meetings complied with the federal Telemarketing Sales Rule, because they were face-to-face – an exception to the regulation that allows for collection of advance fees. The Telemarketing Sales Rule was established to protect consumers from deceptive business practices.

“They’re not alleging that the face-to-face (meetings) did not occur,” Vacco said of the government’s case. “They’re alleging that it wasn’t sufficient.”

James also claimed Strategic Financial Solutions “tricks consumers into believing that contracted law firms will negotiate lower payoff amounts. However, the firms are not meaningfully involved, and most debt-relief negotiations that do take place are conducted by (Strategic Financial Solutions) employees, who are not lawyers.”

Vacco and Connors denied this is the case, saying the law firms and their employees -not employees of Strategic Financial Solutions — negotiate and settle debt for clients.

Vacco said the receiver’s shutdown of Strategic Financial Solutions puts consumers’ debt settlement cases at risk.

“If they want bring their lawsuit and challenge the efficacy of the face-to-face (meetings), OK, let’s have that lawsuit,” he said. “But there’s no reason for them to come in and act like this company is run by a bunch of nefarious characters that they suspect are stealing money from the clients. That’s not what’s happening here.”

Connors filed a motion — which was granted — to intervene in the case on behalf of the law firms, which argue their clients are being harmed by the shutdown. In his motion, he argues the CFPB is “engaged in a back-door effort to unfairly put at least 18 consumer advocacy law firms out of business, without actually suing the law firms.”

Strategic Financial Solutions has 298 employees in New York City; those operations were also shut down by the receiver, Vacco said.

In 2017, the firm announced plans to expand into the Buffalo area. The company moved into office space in Amherst later that year, with a ribbon cutting attended by then-Lt. Gov. Kathy Hochul.

At the time of the shutdown last week, most of Strategic Financial Solutions’ employees in the Buffalo area were working remotely.