Federal Appeals Court Backs District Court: No Notary Exception to Face-to-Face Rule in Debt Relief Case | Shipkevich PLLC

On June 2, 2025, the U.S. Court of Appeals for the Second Circuit issued a decisive ruling in a case involving allegations that certain debt-relief service providers illegally collected advance fees in violation of the Telemarketing Sales Rule (“TSR”). Affirming the decision of the district court, the Second Circuit held that the use of a third-party notary does not satisfy the TSR’s “face-to-face sales presentation” exemption. The Court’s decision aligns with the enforcement posture of the Consumer Financial Protection Bureau (“CFPB”) and several state attorneys general led by New York Attorney General Letitia James who have vigorously pursued such practices as part of broader consumer protection efforts.

The appeal arose from a complaint filed on January 10, 2024, in the U.S. District Court for the Western District of New York by the Consumer Financial Protection Bureau (“CFPB”) and the attorneys general of seven states: New York, Colorado, Delaware, Illinois, Minnesota, North Carolina, and Wisconsin. The complaint sought a temporary restraining order and preliminary injunction against StratFS, LLC (formerly known as Strategic Financial Solutions, LLC), its holding company Strategic Family, Inc., and several affiliated subsidiaries (collectively, “Strategic”) for the alleged unlawful collection of advance fees in violation of the TSR. The District Court granted the requested relief. Strategic argued that its conduct fell within the TSR’s exemption for transactions involving a “face-to-face sales presentation,” asserting that its use of third-party notaries qualified under this exception. The CFPB and state attorneys general disputed this interpretation, contending that the use of notaries did not meet the TSR’s requirements. Strategic appealed the District Court’s ruling to the Second Circuit.

In its opinion, the Second Circuit undertook a detailed analysis of the terms “sales presentation” and “agent of the seller” as used in the TSR. This closely examined the language of the exemption and the principles governing agency relationships, ultimately concluding that the third-party notaries at issue neither conducted sales presentations nor acted as sellers or authorized agents of the seller. Second Circuit held that Strategic had not empowered the notaries to deliver a substantive sales pitch on its behalf, the requirements for invoking the face-to-face exemption were not met. Accordingly, the Second Circuit affirmed the District Court’s order and noted the appellants’ failure to establish a sufficient legal basis for their claims. The matter was remanded for further proceedings consistent with the Court’s ruling.

This opinion carries critical implications for the debt relief services industry, emphasizing a strict interpretation of the TSR’s “face-to-face” exemption. Providers should navigate their operations with heightened awareness that the exemption may not be broadly or liberally applied, especially where consumer protection is of paramount concern.

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