Consumer Fin. Prot. Bureau v. Stratfs, LLC (f/K/A Strategic Fin. Sols.
24-697
| 2d Cir. | Jun 2, 2025Background
- The Consumer Financial Protection Bureau (CFPB) and several states sued Strategic Family, Inc. and related entities (collectively "Strategic"), who provide debt relief services, alleging violations of the Telemarketing Sales Rule (TSR).
- The TSR prohibits advance fees for debt relief services unless a face-to-face sales presentation occurs.
- Strategic collected advance fees from customers and used third-party notaries to visit debtors' homes to notarize contracts, not to sell services.
- The District Court granted a preliminary injunction, asset freeze, and receivership to prevent further TSR violations and safeguard assets.
- Individual defendants Sasson (Strategic's CEO/founder) and Blust (controller of associated law firms and script drafter) were also subjected to the injunction.
- The case comes to the Second Circuit as an appeal of the preliminary injunction and related orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Strategic qualifies for the TSR face-to-face exemption | Strategic’s practice doesn’t meet the exemption | Notaries sent to homes act as agents making sales presentations | Notaries are not agents for sales; Strategic does not qualify |
| Asset freeze injunction and receivership | Necessary to prevent dissipation and get financial clarity | Overreaching and not justified | Orders affirmed; court has inherent equitable authority |
| Individual liability under TSR for Sasson and Blust | Sasson and Blust had knowledge and substantial assistance | No knowledge of wrongdoing, or insufficient involvement | Facts support individual liability |
| Consideration of new legal argument re: TSR’s legality | Argument not raised below, so should not be heard | After Loper Bright, TSR is partly unlawful | Argument forfeited; not considered on appeal |
Key Cases Cited
- Conn. State Police Union v. Rovella, 36 F.4th 54 (2d Cir. 2022) (sets standard for reviewing preliminary injunction orders)
- Smith v. S.E.C., 653 F.3d 121 (2d Cir. 2011) (standard for asset freeze and receivership orders)
- S.E.C. v. Am. Bd. of Trade, Inc., 830 F.2d 431 (2d Cir. 1987) (criteria for receivership in equitable cases)
- Rosen v. Siegel, 106 F.3d 28 (2d Cir. 1997) (court’s authority to appoint a receiver)
- S.E.C. v. Manor Nursing Ctrs., Inc., 458 F.2d 1082 (2d Cir. 1972) (standards for asset preservation and receivership)
- United States v. Weintraub, 273 F.3d 139 (2d Cir. 2001) (knowledge requirement for civil liability)