BUFFALO, N.Y. — New York State Attorney General Letitia James, and six other attorney generals, have filed a lawsuit against a debt-relief company who is accused of charging for illegal fees.
The Attorney General's Office (OAG) says StratFS, LLC, formally known as Statregic Financial Solutions, LLC, and related shell companies, allegedly ran an illegal debt-relief enterprise that defrauded customers. They have offices in Buffalo and New York City.
The OAG says StratFS tricked customers into paying fees by claiming that the company's lawyers would negotiate down their debts, but most of the work was done by people who were not attorneys.
The attorney generals won a temporary restraining order stopping the company from continuing to collect fees and freezing their assets, shortly after filing the lawsuit.
They say the company collected more than $100 million in fees from vulnerable consumers.
“People can fall into debt, but New Yorkers — and all Americans — should not face even greater financial hardship when they attempt to seek help,” said James in a press release. “StratFS, 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. I want to thank CFPB and my fellow attorneys general for their continued partnership in protecting hardworking Americans.”
James said StratFS, LLC violated New York Law § 63(12) and New York General Business Law § 349. Specifically, StratFS harms vulnerable consumers by:
- Charging advance fees: StratFS illegally charges and collects fees before any of a consumer’s debts have been settled. StratFS charges pre-determined fee amounts without any connection to actual settlements or debt-relief savings. Since 2016, StratFS and its web of shell companies have swindled consumers out of more than $100 million.
- Falsely claiming lawyers will provide debt relief: StratFS 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 StratFS employees, who are not lawyers.
According to the OAG, one consumer who had enrolled in debt-relief services, 84% of the money she paid to her account went to fees, and only 16% of the funds were paid to creditors.
“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.”
The other states who joined in the lawsuit are: Colorado, Delaware, Illinois, Minnesota, North Carolina, and Wisconsin.