Strategic Financial Solutions Sued Over Alleged Affiliate Law Firm Debt Relief Scheme

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A proposed class action lawsuit alleges Strategic Financial Solutions, LLC (SFS) is the “central actor” in an ongoing fraudulent scheme by which the company and its affiliates bill for services as debt relief consultants yet, in fact, do “collectively little negotiating” on behalf of clients. 

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According to the 51-page suit, SFS was formed after former Illinois Attorney General Lisa Madigan took action to shut down the last purported debt-relief organization with which SFS’s chief executive officer, Ryan Sasson, was involved—which resulted in the disbarment of two attorneys who ran the group. The case states that debt relief companies are strictly regulated by states and the Federal Trade Commission, and non-attorney debt relief providers in the states in which the defendants operate are essentially limited to contingency payments only, based on the amount of debt reduction they achieve and after the successful completion of services.

The complaint claims that although SFS is not a law firm, it has billed clients of its network of attorneys more than is permissible under state debt collection laws while exposing the consumers to defaults, lawsuits and other consequences. The business relationship between SFS and co-defendant Versara Lending is, according to the case, “carefully constructed” to maximize their billing opportunities while “obscuring” the relationship between SFS and its affiliate law firms, the suit alleges. 

“This scheme is deceptive. The clients do not know that SFS is the entity that recruits them, do not know its relationship to the lawyer who represents them, do not know that SFS’s billing processors withdraw from their accounts, do not know that SFS does the work of any negotiation, and do not know that SFS gets a share of the fees they pay. This arrangement is a consumer fraud.” 

Strategic Financial Solutions, the case claims, uses fictional intermediaries to find debtors and offers services other than debt relief to entice the individuals. The lawsuit says SFS also recruits lawyers or law firms to act as client interfaces without disclosing its role in the operation, and initiates and controls the billing relationship with clients. The defendant also causes all communications with a client to be directed to SFS’s own employees at its own call center, all without the client’s knowledge, the complaint alleges. 

According to the lawsuit, SFS has created a network of attorneys recruited to form affiliate firms who are committed to finding clients via debt-relief advertising, which SFS allegedly pays for. Further, these affiliate firms, the case says, facilitate the client signup process and ensure regular withdrawals from clients’ bank accounts, the operation of which is also paid for by SFS. 

Per the complaint, SFS then takes a majority portion of both the upfront and monthly fees deducted from consumers’ bank accounts. This practice, the lawsuit argues, constitutes fee sharing with non-lawyers and the improper handling of entrusted client funds. 

According to the suit, clients pay SFS upfront and monthly fees, and not a contingent share of any debt relief result the company may have achieved. Once a client agrees to representation, SFS, not an affiliate law firm, hires and dispatches a notary to the person’s residence to have them sign a purported retainer agreement with the affiliate firm, even though the firm is “not even notified of the client’s existence until SFS has begun the bank withdrawal process and the client believes the relationship with the affiliate firm to have begun.” 

The lawsuit claims that all of the actual debt-relief work is done not by attorneys but by SFS and its call center. 

“SFS is not a law firm and could only lawfully bill on a contingent basis in the states in which it operates behind Affiliate firms (which is far less lucrative, because actual debt reduction is not easily achieved),” the case says. “SFS goes to elaborate lengths to conceal its identity and involvement, presence, and especially the reality that its employees are performing any actual debt negotiation.” 

The lawsuit looks to cover all persons in the United States who entered into purported retainer agreements with any SFS affiliate law firm and paid with initial and/or monthly fees rather than contingent fees in states where monthly fees are impermissible for non-attorney debt relief companies and in which SFS maintains an affiliate firm. These states, the suit says, include, but are not necessarily limited to, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Illinois, Kansas; Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Tennessee, Texas, Wisconsin, and Wyoming. 

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