Strategic financial solutions, facing accusations of fraud, cannot work

The federal government is likely to win its case against Strategic Financial Solutions, a debt trading firm covered in a Times investigation last month, under a district judge’s preliminary injunction granted this week that prevents it from function.

For years, Strategic Financial Solutions collected fees from thousands of low-income customers who signed up with the company to negotiate debt reduction. In January, the Consumer Financial Protection Bureau — along with the attorneys general of New York, Colorado, Delaware, Illinois, Minnesota, North Carolina and Wisconsin — sued Strategic and its operatorsincluding its general manager, Ryan Sasson, for civil fraud.

In interviews with former Strategic employees and clients, many described the company as predatory and said its services often left people worse off financially. The company works with a national network of complicit law firms. Clients think they are paying these companies to represent them in the high-risk debt settlement process, but instead they are often referred to call center workers without legal training and sometimes go unrepresented in legal proceedings.

This week, a federal judge in the Western District of New York ruled that the debt relief program run by Strategic and its associated law firms did not provide “appreciable economic benefits” to its clients, and that many of those who signed up for the program are negatively impacted. »

Federal law states that law firms offering telephone debt settlement services must complete the transaction in person, through an in-person meeting with a sales representative, if they wish to charge an upfront fee. The regulators’ case hinges on whether companies affiliated with Strategic violated that law by relying on on-demand notaries to meet with clients in person.

The federal judge wrote that the notary meetings “do not allow consumers to be better informed about the” debt relief program managed by Strategic and its legal partners.

Mr. Sasson filed a notice of appeal with the United States Court of Appeals for the Second Circuit on Tuesday. “This decision is based on a very narrow interpretation of the telemarketing rules,” said Dennis Vacco, an attorney representing Strategic. “We are confident that we will win.”

Strategic’s former clients celebrated the preliminary injunction. “Everything can be done to prevent other families from going through what we had to go through,” said Anne Barsch, a former client who testified last month at Strategic’s trial in Buffalo.