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Attorney General Josh Stein and CFPB Sue Strategic Financial Solutions

For Immediate Release:
Friday, January 19, 2024

Contact: Nazneen Ahmed
919-716-0060

(RALEIGH) Attorney General Josh Stein joined the Consumer Financial Protection Bureau (CFPB) and six other attorneys general in filing a lawsuit against Strategic Financial Solutions (SFS) and related entities for allegedly running an illegal debt-relief scheme. Attorney General Stein is alleging that SFS, through various sham law firms it controlled, collected hundreds of millions of dollars in illegal fees from unsuspecting people who wanted help with their debts.

“North Carolinians were looking for help with their debts,” said Attorney General Josh Stein. “Instead, they got scammed by these fraudulent law firms and lost even more money. I will do everything in my power to hold accountable organizations that break the law and take advantage of vulnerable people.”

“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.”

Since at least 2016, SFS has run a large debt-relief scheme that appears to help people reduce their unsecured debts by reaching reduced settlements with their creditors. Customers are lured in by mailers that claim SFS can assist with debt consolidation loans; however, when consumers call, they are told they don’t qualify for a loan and are pitched a debt settlement program instead.

The consumers are then referred to a “law firm” or other SFS-controlled business that they are told will negotiate with their creditors and will represent them if they are sued by their creditors. Instead, the “law firm” typically has only one or two licensed attorneys to handle thousands of clients, and the attorneys perform little work. To the extent any work is done, SFS does most of it, including contacting and negotiating with creditors.

SFS’ customers are told to stop paying their creditors and make monthly payments to a “trust account” maintained by a third party instead. The defendants then collect exorbitant advance fees, which makes it almost impossible for customers to save enough money to settle debts with creditors until after they’ve been in the program for many months. Because it takes so long, creditors often sue customers for nonpayment and people end up in worse financial situations.

Attorney General Stein and the CFPB are seeking a temporary restraining order and preliminary injunction. The court granted the request for a temporary restraining order and has appointed a temporary receiver over defendants’ operations.

Attorney General Stein is joined in this lawsuit by the attorneys general of Colorado, Delaware, Illinois, Minnesota, New York, and Wisconsin.

A copy of the complaint and temporary restraining order can be viewed here.

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