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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 1 of 21 

UNITED STATES DISTRICT COURT 

FOR THE NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

FEDERAL TRADE COMMISSION,

 Plaintiff, 

vs. 

AMERICAN FINANCIAL BENEFITS 

CENTER, a corporation, also d/b/a AFB and 

AF STUDENT SERVICES, et al., 

 Defendants. 

Case No: C 18-00806 SBA 

Related to Case No: C 17-04817 SBA 

ORDER DENYING DEFENDANTS’ 

MOTION TO DISMISS 

Dkt. 117 

The Federal Trade Commission (“FTC”) brings the instant consumer fraud action 

against Defendants American Financial Benefits Center (“AFBC”), Ameritech Financial 

(“Ameritech”), Financial Education Benefits Center (“FEBC”), and Brandon Frere 

(“Frere”) (collectively, “Defendants”). The matter is presently before the Court on 

Defendants’ motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6). 

Dkt. 117. Having read and considered the papers filed in connection with this matter, and 

being fully informed, the Court hereby DENIES the motion, for the reasons stated below.1 

I. BACKGROUND

A. THE PARTIES 

The FTC is an independent agency of the United States government. Compl. ¶ 4, 

Dkt. 1. The FTC is charged with the enforcement of the Federal Trade Commission Act 

(“FTC Act”), 15 U.S.C. §§ 41 et seq., which prohibits, inter alia, “unfair or deceptive acts 

or practices in or affecting commerce.” Id. § 45(a)(1). The FTC is also charged with the 

1

 The Court, in its discretion, finds this matter suitable for resolution without oral 

argument. See Fed. R. Civ. P. 78(b); N.D. Cal. Civ. L.R. 7-1(b). 
 

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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 2 of 21 

enforcement of the Telemarketing and Consumer Fraud and Abuse Prevention Act (the 

“Telemarketing Act”), 15 U.S.C. §§ 6101 et seq. Pursuant to its authority under the 

Telemarketing Act, the FTC promulgated the Telemarketing Sales Rule (“TSR”), 16 C.F.R. 

pt. 310, which prohibits deceptive or abusive telemarketing acts or practices. See 15 U.S.C. 

§ 6102(a); 16 C.F.R. pts. 310.3-310.4. A violation of the TSR constitutes a violation of the 

FTC Act. See 15 U.S.C. §§ 57a, 6102(c). 

AFBC was incorporated in California in February 2011. Compl. ¶ 6. Ameritech and 

FEBC were incorporated in California in October 2015. Id. ¶¶ 7-8. Frere is the founder, 

CEO, and majority owner of AFBC, Ameritech, and FEBC (collectively, “the 

Companies”). Id. ¶ 9. Defendants transact or have transacted business in this district and 

throughout the United States. Id. ¶¶ 6-9. Specifically, the Companies have “advertised, 

marketed, distributed, or sold student loan debt relief services to consumers throughout the 

United States.” Id. ¶¶ 6-8. In conducting the business practices at issue in this action, the 

Companies have operated as a common enterprise. Id. ¶ 10. Frere “formulated, directed, 

controlled, had the authority to control, or participated in the acts and practices” of the 

Companies that constitute the common enterprise. Id.

B. STUDENT LOAN FORGIVENESS AND REPAYMENT PROGRAMS 

To address elevated levels of distressed student loan debt, the Department of 

Education (“DOE”) and state government agencies administer a limited number of loan 

forgiveness and discharge programs. Compl. ¶ 15. These programs include Public Service 

Loan Forgiveness (“PSLF”) and income-driven repayment (“IDR”). Id. ¶¶ 16-17. 

IDR programs enable borrowers to reduce their monthly payment and have portions 

of their loans forgiven. Id. ¶ 17. Specifically, IDR allows eligible borrowers to limit their 

monthly payments based on a percentage of their discretionary monthly income. Id. To 

remain in an IDR program, borrowers must recertify their income and family size annually. 

Id. Because a borrower’s income likely fluctuates over the life of the loan, monthly 

payments under an IDR program can vary considerably from year to year. Id. ¶ 18. If a 

borrower’s income increases over the repayment period, for example, monthly payments 

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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 3 of 21 

can correspondingly increase, such that the loan is paid off before any amount can be 

forgiven. Id. Obtaining loan forgiveness through an IDR program requires a minimum of 

20 or 25 years of qualifying payments. Id. ¶ 17. As of September 2017, no loans had been 

forgiven under an IDR program. Id.

Consumers can apply for the PSLF, IDR, and other loan repayment and forgiveness 

programs through the DOE or their student loan servicer at no cost; these programs do not 

require the assistance of a third-party company or the payment of application fees. Id. ¶ 19. 

The DOE will grant forbearance while processing applications for an alternative repayment 

plan and in some cases of hardship. Id. ¶ 20. During forbearance, unpaid interest is added 

to the principal balance. Id.

C. DEFENDANTS’ BUSINESS PRACTICES 

It is alleged that, since 2014 and continuing thereafter, Defendants have operated a 

“debt relief enterprise that has tricked consumers out of millions of dollars.” Compl. ¶ 12. 

Defendants distribute mailers claiming that consumers are eligible for federal loan 

assistance programs that would permanently reduce their monthly loan payments to a fixed 

amount or result in total loan forgiveness. Id. Defendants collect an advance fee of $600 to 

$800, purportedly to enroll consumers in these programs. In numerous instances, the 

consumer was not enrolled in the promised program. Id. In some instances, not only was 

the consumer’s loan balance not reduced, but it also continued to accrue interest. Id. In 

addition to advance fees, Defendants also collect and retain monthly fees that consumers 

believe are applied to pay down their loans, but actually go toward membership in a 

“financial education” program that includes access to various services unrelated to their 

student loans. Id. ¶ 13. Defendants have collected over $28 million from consumers. Id.

1. Marketing of Student Loan Debt Relief Services 

In marketing their services, Defendants have disseminated, or caused to be 

disseminated, personalized mailers to consumers throughout the United States. Compl. 

¶ 22 & Exs. A-E (mailers). According to the FTC, the mailers contain many deceptive 

statements. Id. For example, many mailers state that the consumer has been “pre-

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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 4 of 21 

qualified” to reduce their payments through the “Student Loan Document Preparation and 

Processing Services Program.” Id. Mailers also include specific dollar amounts for the 

reduced payments, payoff amount, and total loan savings. Id. Mailers do not advertise or 

describe a monthly membership to any service. Id. ¶ 23. 

As alleged by the FTC, the mailers “create a sense of urgency” by indicating that the 

offers are available for a limited time. Id. ¶ 24, e.g., Ex. C (“Failure to respond to this 

letter may cancel the offer for services.”). Mailers often do not include the Companies’ 

names. Id. ¶ 25. Instead, they purport to be from the “Student Loan Department” or the 

“Student Loan Payment Reduction Dept.” Id. Mailers include a toll-free phone number 

where consumers can reach Defendants. Id. ¶ 26. The recorded message that consumers 

hear while waiting to be connected to a sales agent has stated: “You have reached the 

program enrollment department,” and “[T]o speak with an account specialist regarding an 

important notice you’ve received, please stay on the line.” Id.

Defendants advise consumers that their new monthly payment amount will apply for 

10 or 20 years, after which time their remaining loan balances will be forgiven. Id. ¶ 27. 

Defendants also advise consumers that they will save a specific amount of money, usually 

in the thousands of dollars. Id. According to the FTC, any representation that Defendants 

are able to procure a permanent reduction in monthly payments is false or unsubstantiated 

because IDR programs do not guarantee a fixed payment amount for more than one year. 

Id. ¶ 31. Further, given that IDR payments fluctuate over time based on income, any 

representation as to the specific amount that consumers will save is misleading. Id.

It is further alleged that Defendants make false or unsubstantiated representations to 

consumers about their eligibility for IDR programs based on inaccurate family size and 

income information. Id. ¶ 28. For example, Defendants counsel consumers to inflate their 

family size on the IDR application. Id. In a recorded call, one sales representative stated: 

Now, support includes any kind of money - gifts, loans, housing, food, 

clothing, car, medical or dental, payment of college costs. Do you help 

anybody - if you have somebody on your cell phone plan; if you have 

somebody on your gym membership, they’re considered part of your family. 

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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 5 of 21 

And we just had Christmas. You know, if you bought presents, clothes, watch, 

earrings, toilet paper, they’re a part of your family. 

Id. In reality, however, “family size” is determined “by counting the borrower, the 

borrower’s spouse, and the borrower’s children . . . if the children receive more than half 

their support from the borrower.” Id. ¶ 29 (quoting 34 C.F.R. § 682.215(a)(3)). It may also 

include “other individuals if, at the time the borrower certifies family size, the other 

individuals - (i) Live with the borrower; and (ii) Receive more than half their support from 

the borrower and will continue to receive this support from the borrower for the year the 

borrower certifies family size.” Id. (quoting 34 C.F.R. § 682.215(a)(3)). As a result, 

consumers may be enrolled in programs for which they do not qualify. Id. ¶ 30. 

After consumers agree to enroll in a program and turn over their payment 

information, Defendants email a link to a lengthy contract that consumers are required to 

sign electronically. Id. ¶ 32. As consumers remain on the phone, Defendants pressure 

them to quickly click through the documents and electronically sign multiple pages. Id. In 

some instances, Defendants represent that the consumer not need read the agreement 

carefully because the information contained in the contract was already discussed in the 

call. Id. At the end of the call, consumers are transferred to the Verification Department 

and are quickly read lengthy disclosures. Id.

As stated above, Defendants charge consumers an advance fee for “document 

preparation” ranging from $600 to $800, which they generally collect over one to six 

installments before attempting to enroll consumers in any federal program. Id. ¶ 33. 

2. Marketing of “Financial Education” Memberships 

In addition to charging advance fees, Defendants also charge consumers a monthly 

fee for the life of their loan. Compl. ¶ 34. The monthly fee ranges from $49 to $99. Id.

Defendants represent that the monthly fee will be used to pay down consumers’ 

loans. Id. For example, after reciting a consumer’s loan balance, pay off amount, and 

estimated savings in the program, Defendants told a consumer, “Your quote based on your 

current situation is $255 for 1 month then it would drop down to $235 for an additional 6 

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Case 4:18-cv-00806-SBA Document 157 Filed 08/08/18 Page 6 of 21 

months then it will be $99 for the remainder of your loan term, if your situation stays the 

same, which would be 25 years.” Id., Ex. F (email to consumer). 

In fact, Defendants apply the monthly fee toward a membership in their “financial 

education” program. Id. ¶ 35. The membership fees, which agents rarely discuss during 

sales calls, are used to pay for access to various resources unrelated to consumers’ student 

loans. Id. Such services include “Key Ring & Luggage Protection,” “Everyday Grocery 

Savings,” “Auto Buying Service and Maintenance Discounts,” “Financial Calculators,” and 

more. Id. & Ex. G (contract excerpts). Documentation regarding the membership services 

often is buried in the middle of numerous documents Defendants provide to consumers. 

Id., & Ex. H (consumer documents) at H-17. In addition to the monthly membership fee, 

Defendants charge consumers an enrollment fee for the “financial education” program that 

ranges from $100 to $1,300. Id. ¶ 35. 

Defendants’ collection notices further reinforce their representations that consumers’ 

monthly payments are going toward their student loans. Id. ¶ 36. If a consumer misses a 

monthly payment for the “financial education” program, Defendants send a notice stating, 

“*** YOUR FILE IS CURRENTLY ON HOLD***” and “RE: Student Loan 

Payment.” Id., Ex. I (consumer notice). Defendants often refuse to provide refunds or 

provide only partial refunds that are substantially less than consumers paid. Id. ¶ 37. 

3. Role of Defendant Frere 

The Complaint alleges that Frere, acting alone or in concert with others, 

“formulated, directed, controlled, had the authority to control, or participated in the acts and 

practices of the [Companies], including the acts and practices set forth in [the] Complaint.” 

Compl. ¶ 38. Frere founded and incorporated AFBC, Ameritech, and FEBC. Id. ¶¶ 39-41. 

He is the majority owner of each entity, and has served as the CEO, Secretary, CFO and 

sole Director of each entity since its incorporation. Id. Frere has signed contracts with 

consumers as the “Managing Director” of AFBC. Id. ¶ 39. He has also been the signatory 

on AFBC and Ameritech’s depository bank accounts. Id. ¶ 42. 

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In late 2015, Frere submitted an application to the Better Business Bureau (“BBB”) 

serving Northeast California seeking accreditation for Ameritech. Id. ¶ 43. In June 2016, 

the BBB sent Frere a letter describing customer complaints, including complaints that 

customers were “scammed” and led to believe that their payments to the company were 

applied toward their student loan balances. Id. The BBB continued to express concerns 

about Ameritech’s business practices until June 2017, when Ameritech advised the BBB 

that it was closing its office in the Sacramento area. Id.

As the “owner, high-ranking corporate officer, and active participant in the daily 

activities of the [Companies],” Frere allegedly “knew that the [Companies’] representations 

to consumers were false or unsubstantiated, was recklessly indifferent to the truth or falsity 

of such representations, or was aware of a high probability that the representations were 

fraudulent and intentionally avoided the truth.” Id. ¶ 44.

 D. PROCEDURAL HISTORY 

The FTC initiated the instant consumer fraud action on February 7, 2018. Dkt. 1. 

The Complaint alleges claims for: (1) Violations of the FTC Act - Deceptive Student Loan 

Debt Relief Representations; (2) Violations of the TSR - Advance Fee for Debt Relief 

Services; and (3) Violations of the TSR - Material Debt Relief Misrepresentations. Id. The 

FTC seeks injunctive and other equitable relief, as well as monetary relief in the form of 

restitution, refund of monies paid, and disgorgement of ill-gotten monies. Id.

On March 2, 2018, the FTC filed a motion for preliminary injunction, which was set 

for hearing on May 9. Dkt. 22. On April 23, 2018, Defendants filed the instant motion to 

dismiss, which was set for hearing on June 13. Dkt. 117. The Court issued an order to 

coordinate scheduling in this and a related action and set both motions for hearing on June 

13. Dkt. 122.2

 The Court referred the action for an early settlement conference. Dkt. 126. 

2 On August 19, 2017, the Companies filed a declaratory relief action against the 

FTC. American Financial Benefits Center v. FTC, Case No. 17-cv-04817-SBA, Dkt. 1. 

Upon the filing of the instant action, the Court deemed the two actions related. Id., Dkt. 38.

On May 29, 2018, the Court dismissed the Companies’ declaratory relief action for lack of 

subject matter jurisdiction. Id., Dkt. 51. The Companies have appealed. Id., Dkt. 53. 

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On June 11, 2018, the Court took the motion for preliminary injunction and motion 

to dismiss under submission. Dkt. 138. Thereafter, the action did not settle, and the parties 

filed several administrative motions concerning the motion for preliminary injunction, 

including Defendants’ motion to consider additional evidence or, in the alternative, hold an 

evidentiary hearing. See Dkt. 139, 140, 141, 144, 146. The motion for preliminary 

injunction and related administrative motions will be addressed in a separate order. 

II. LEGAL STANDARD 

A. RULE 12(B)(6) 

Federal Rule of Civil Procedure 12(b)(6) “tests the legal sufficiency of a claim.” 

Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). “Dismissal under Rule 12(b)(6) is 

proper when the complaint either (1) lacks a cognizable legal theory or (2) fails to allege 

sufficient facts to support a cognizable legal theory.” Somers v. Apple, Inc., 729 F.3d 953, 

959 (9th Cir. 2013). In assessing the sufficiency of a complaint, the court is to “accept all 

factual allegations in the complaint as true and construe the pleadings in the light most 

favorable to the nonmoving party.” Outdoor Media Group, Inc. v. City of Beaumont, 506 

F.3d 895, 899-900 (9th Cir. 2007). “To survive a motion to dismiss, a complaint must 

contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible 

on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff 

pleads factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678.

 B. RULES 8(A) & 9(B) 

Generally, pleadings must contain only “a short and plain statement of the claim 

showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). When alleging fraud, 

however, “a party must state with particularity the circumstances constituting fraud . . . .” 

Id. 9(b). “Rule 9(b) demands that the circumstances constituting the alleged fraud be 

specific enough to give defendants notice of the particular misconduct . . . so that they can 

defend against the charge and not just deny that they have done anything wrong.” Kearns

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v. Ford Motor Co., 567 F.3d 1120, 1124 (9th Cir. 2009) (quotation marks and citations 

omitted). “Averments of fraud must be accompanied by ‘the who, what, when, where and 

how’ of the misconduct charged.’” Vess v. Ciba-Geigy Corp. USA, 317 F.3d 1097, 1106 

(9th Cir. 2003) (quoting Cooper v. Pickett, 137 F.3d 616, 627 (9th Cir. 1997) (internal 

quotation marks omitted)). To satisfy Rule 9(b)’s specificity requirement, a plaintiff must 

allege the content of the false representations. Swartz v. KPMG LLP, 476 F.3d 756, 764 

(9th Cir. 2007) (quotation marks and citation omitted). In addition, “‘[a] plaintiff must set 

forth more than the neutral facts necessary to identify the transaction. The plaintiff must set 

forth what is false or misleading about a statement, and why it is false.’” Vess, 317 F.3d at 

1106 (quoting In re GlenFed, Inc. Sec. Litig., 42 F.3d 1541, 1548 (9th Cir. 1994), 

superseded by statute on other grounds). 

III. DISCUSSION 

Defendants move to dismiss the Complaint on the grounds that: (1) Counts One and 

Three sound in fraud but are not pled with the specificity required by Rule 9(b); (2) the 

Complaint fails to state a claim of individual liability against Frere; (3) the Complaint fails 

to state a claim under the TSR because it does not adequately allege that the Companies 

provide a “debt relief service”; and (4) Count Two fails to state a claim under the TSR 

because the Companies do not violate its advanced fee provisions. 

A. FRAUD NOT PLED WITH SPECIFICITY3 

Count One alleges that, in offering student loan debt relief services, Defendants 

represented, directly or indirectly, expressly or by implication, that (a) consumers’ monthly 

payments to Defendants would be applied toward consumers’ student loans, and 

3 “Courts within the Ninth Circuit and elsewhere are split as to whether Rule 8 or 

Rule 9(b) applies to claims brought under Section 5 of the FTC Act.” FTC v. DeVry Educ.

Grp., Inc., CV-16-00579-MWF-SSx, 2016 WL 6821112, at *3 (C.D. Cal. May 9, 2016) 

(compiling cases); see also FTC v. Wellness Support Network Inc., No. C-10-04879 JCS,

2011 WL 1303419, at *8 (N.D. Cal. Apr. 4, 2011). As rightly asserted by the FTC,

resolution of the instant motion does not require the Court to decide which rule applies 

because, as explained below, the allegations here satisfy both the general and heightened 

pleading standards. See, e.g., DeVry, 2016 WL 6821112, at *3 (declining to reach the 

issue); Wellness Support Network, 2011 WL 1303419, at *9 (same). The Court therefore 

assumes without deciding that the heightened pleading standard of Rule 9(b) governs. 

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(b) consumers were qualified for, or were approved to receive, loan forgiveness or other 

programs that would permanently lower or eliminate their loan payments or balances. 

Compl. ¶ 47. It is further alleged that, in truth or fact, such representations were false or 

unsubstantiated, and therefore constitute deceptive acts or practices in violation of Section 

5(a) of the FTC Act. Id. ¶¶ 48-49. Count Three makes the same substantive allegations, 

but sets forth a violation of Section 310.3(a)(2)(x) of the TSR. 

Section 5 of the FTC Act prohibits “unfair or deceptive acts or practices in or 

affecting commerce.” 15 U.S.C. § 45(a)(1). In order to establish a deceptive act or 

practice, the FTC must allege: (1) a representation, omission, or practice that, (2) is 

material, and (3) is likely to mislead consumers acting reasonably under the circumstances. 

FTC v. Stefanchik, 559 F.3d 924, 928 (9th Cir. 2009) (quoting FTC v. Gill, 265 F.3d 944, 

950 (9th Cir. 2000)). “Deception may be found based on the ‘net impression’ created by a 

representation.” Id. (quoting FTC v. Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th Cir. 

2006)). Similarly, the TSR prohibits deceptive telemarketing acts or practices. 16 C.F.R. 

§ 310.3(a). In particular, it is a deceptive act or practice for a seller or telemarketer to 

misrepresent, directly or by implication, any “material aspect of any debt relief service, 

including but not limited to, the amount of money or the percentage of the debt amount that 

a customer may save by using such service . . . .” Id. § 310.3(a)(2)(x). 

Defendants move to dismiss Counts One and Three on the ground that they sound in 

fraud but do not satisfy the heightened pleading standard of Rule 9(b). According to 

Defendants, the FTC’s allegations of false or unsubstantiated representations “lack 

specificity and are untethered to any alleged fact or exhibit that provides support for these 

allegations.” Mot. at 8. The Court disagrees. 

The FTC alleges the content of the alleged misrepresentations and provides several 

examples of mailers or other communications containing such representations. Further, the 

FTC does not merely allege that the representations are false or unsubstantiated, but also 

explains why and how they are so. See DeVry, 2016 WL 6821112, at *5. For example, the 

FTC explains that the Companies’ representations regarding fixed payments and total loan 

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savings are false or unsubstantiated because monthly payment amounts fluctuate from year 

to year based on the borrower’s income and family size, and thus, whether any portion of a 

borrower’s loan will be forgiven, and if so, how much, cannot be determined. The 

allegations of the Complaint thus show that “the FTC’s claims have a factual basis and 

provide Defendants with adequate notice as to the FTC’s reasons for believing that [the 

representations] [are] unsubstantiated and materially false.” Id., at *6. “Put another way, 

the FTC has identified the ‘who’ [the Companies, acting in a common enterprise, and 

Frere]; the ‘what’ [misrepresentations regarding loan savings and program fees]; the ‘when’ 

[2014 and onward]; the ‘where’ [throughout United States]; and the ‘how’ [by stating that 

monthly payments will remain fixed and certain sums be forgiven and that fees associated 

with the programs go toward loan balances].” Id. “Rule 9(b) requires no more.” Id.

In arguing to the contrary, Defendants contend that the allegations of the Complaint 

are insufficient because the FTC “misrepresents the content of the attached mailers.” Mot. 

at 9. Specifically, the FTC alleges that “Defendants distribute mailers to consumers 

claiming that consumers are eligible for federal programs that would permanently reduce 

their monthly loan payments to a fixed amount or result in total loan forgiveness.” Compl. 

¶ 12. Defendants assert that, contrary to the FTC’s allegations, the mailers “make a number 

of disclosures,” including that: (1) the Companies provide “document preparation and 

processing services for a fee”; (2) the Companies “cannot guarantee warranty or predict the 

outcome in any particular situation”; and (3) a consumer “may apply on [his/her] own 

directly with the DOE for its services without fee.” Mot. at 9 (quoting Compl., Ex. D-1). 

Quoting language such as, “this program can potentially save you thousands on your 

student loans and prepare you for Total Loan Forgiveness . . . ,” Defendants further assert 

that the mailers make no “unequivocal” promises. Id. (quoting Ex. D-1). Defendants thus 

argue that the mailers “contradict” the allegations of the Complaint. Id.

As rightly argued by the FTC, Defendants’ reliance on the mailers’ “[f]ine-print 

disclosures” is unavailing, particularly at the pleading stage. Opp’n at 4. “A solicitation 

may be likely to mislead by virtue of the net impression it creates even though the 

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solicitation also contains truthful disclosures.” Cyberspace.Com, 453 F.3d at 1200. “[A] 

disclaimer does not automatically exonerate deceptive activities.” FTC v. Gill, 74 F. Supp. 

2d 1030, 1044 (C.D. Cal. 1999), aff’d, 265 F.3d 944 (9th Cir. 2001); see also FTC v. 

Medlab, Inc., 615 F. Supp. 2d 1068, 1077 (N.D. Cal. 2009) (“Defendants cannot inoculate 

themselves from the representations that appear in the body of the text by including these 

cautionary statements at the foot of the advertisement.”). Nor does the lack of an 

unequivocal promise preclude deception. See Gill, 74 F. Supp. 2d at 1044 (“the lack of 

guarantee does not negate the misrepresentations” when a guarantee was “implied in the 

text”). Here, given the overall content of the mailers, the FTC adequately alleges one or 

more misrepresentations. See DeVry, 2016 WL 6821112, at *5 (denying motion to dismiss 

where defendants’ advertisements “at least plausibly create[d]” a misleading impression). 

Defendants further argue that “[o]ther generalized allegations also do not satisfy 

Rule 9(b).” Mot. at 9. For example, with regard to the alleged representation that 

consumers’ monthly payments will be fixed for a certain period and, thereafter, the 

remaining balances forgiven, Defendants argue that the FTC “does not supply any details of 

specific representations to individual consumers.” Mot. at 9-10. “Given that Defendants 

purportedly have engaged in their allegedly deceptive business for the past four years,” they 

argue that it “strains credulity to believe that each encounter between Defendant’s 

employees and the consumers involved identical interactions and identical representations.” 

Id. at 10. The FTC is not required to allege “the specific representations” made to each 

individual consumer, however. Indeed, such a requirement would likely prove fatal to 

large-scale consumer protection actions. Likewise, “a plaintiff ‘is not required to allege all 

facts supporting each and every instance’ of allegedly fraudulent conduct.” CFPB v. Prime

Mktg. Holdings, LLC, No. CV 16-07111-BRO (JEMx), 2017 WL 2772313, at *13 (C.D. 

Cal. Jan. 19, 2017) (quoting Ebeid ex rel. U.S. v. Lungwitz, 616 F.3d 993, 999 (9th Cir. 

2010) (internal quotation marks and citation omitted)). It is sufficient that the FTC has 

provided “several examples of allegedly fraudulent statements.” Id.

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Defendants remaining arguments fare no better. Defendants argue that the FTC 

“cites only two supposed communications”—an email and a phone call—“between 

Defendants and a consumer.” Mot. at 10. But the five mailers attached to the Complaint 

also constitute communications. Defendants further argue that “[c]ertain allegations in the 

Complaint,” such as the claim that consumers’ incomes will rise over the years-long 

repayment period, “are sheer speculation.” Id. This particular allegation does not itself 

allege fraud, but rather, explains why promises of fixed payments and total loan savings are 

unsubstantiated. The fact that “neither [the Companies] nor the FTC are able to predict the 

future” when it comes to consumers’ income, id., is precisely the FTC’s point. Defendants 

also point out that “[o]ther allegations,” such as the allegation that the Companies often 

refuse to provide refunds, “are vague and do not allege fraud or deception.” Id. The 

inclusion of potentially extraneous allegations does not mandate dismissal, however. 

Finally, Defendants take issue with the allegation that their purportedly deceptive 

business practices have occurred “since 2014 and continuing thereafter.” See Compl. ¶ 12. 

Defendants note that neither Ameritech nor FEBC was incorporated until October 2015. 

Defendants further note that two of the five mailers attached as exhibits to the Complaint 

(Exhibits A and B) predate the incorporation of Ameritech and FEBC. Defendants 

conclude: “Ameritech and FEBC cannot be liable for statements made prior to October 

2015. Such allegations clearly do not meet the Rule 9(b) standard.” Mot. at 11. 

As an initial matter, where a common enterprise is alleged, allegations regarding the 

specific conduct of each corporate defendant are not required. FTC v. OMICS Grp. Inc., 

302 F. Supp. 3d 1184, 1195 (D. Nev. 2017) (“Under the common enterprise theory, 

Defendants’ contention that the Complaint fails for not particularizing allegations to each 

Corporate Defendant is misplaced, as each are liable for the scheme as a whole.”); FTC v. 

Johnson, No. 2:10-CV-02203-MMD, 2013 WK 2460359, at *5 (D. Nev. June 6, 2013) 

(“That the FTC does not allege with particularity the actual involvement of each shell entity 

in the common enterprise is not fatal.”). Defendants do not challenge the allegation of a 

common enterprise. Thus, the FTC need not specify the conduct attributable to each entity. 

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As for the time period over which the conduct occurred, the FTC aptly observes that 

there is “a common-sense inference that [the Companies] were not part of the common 

enterprise to the extent they did not exist.” Opp’n at 7. Indeed, the Complaint alleges 

deceptive practices spanning several years, which, by implication, originated with AFBC 

and later evolved to include Ameritech and FEBC. Although two of the mailers attached to 

the Complaint predate the incorporation of Ameritech and FEBC, the other three mailers do 

not, and at least one of them was sent as recently as 2017. The fact that the allegedly 

deceptive practices, and thus, some specific examples of the alleged misrepresentations, 

occurred prior to the incorporation of Ameritech and FEBC does not necessitate a dismissal 

where the Complaint otherwise alleges sufficient facts regarding these entities, their 

common enterprise, and the continuation of the challenged business practices.4 

Accordingly, Counts One and Three adequately allege claims for deceptive business 

practices in violation of the FTC Act and the TSR. 

B. INDIVIDUAL LIABILITY OF DEFENDANT FRERE 

The Complaint alleges that Frere is personally liable for the Companies’ deceptive 

business practices. Defendants move to dismiss the claims against Frere, arguing that the 

allegations are insufficient to establish his individual liability. 

To obtain injunctive relief against an individual defendant, the FTC must establish 

that he “participated directly in the acts or practices or had authority to control them.” FTC

v. Publ’g Clearing House, Inc., 104 F.3d 1168, 1170 (9th Cir. 1997) (citation omitted) (“[an 

4 Indeed, in the related action, the Companies explicitly alleged that FEBC and 

Ameritech were formed in 2015 in an attempt to avoid running afoul of the TSR. First Am. 

Compl. ¶¶ 20-22, Dkt. 19, Case No. 17-cv-04817-SBA. Prior to FEBC and Ameritech’s 

incorporation, AFBC had provided consumers with both the student loan processing 

services and the supplemental membership benefits. Id. ¶ 20. FEBC and Ameritech were 

formed in order to separate those services, such that the membership program could “be 

characterized as an optional external upsell under the TSR.” Id. ¶ 22. Thus, it can

reasonably be asserted that the incorporation of the entities was done for the very purpose 

of continuing the business practices that are now challenged by the FTC as deceptive. 

Whether the Companies succeeded in structuring their businesses in a manner that achieves 

compliance with the law remains to be seen, and the Court expresses no opinion on that 

matter at this juncture. However, it is clear that the Companies’ business practices are 

sufficiently intertwined such that the allegation of events occurring prior to FEBC and 

Ameritech’s incorporation is generally permissible. 

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individual’s] assumption of the role of president of [a corporation] and her authority to sign 

documents on behalf of the corporation demonstrate that she had the requisite control”). To 

hold an individual liable for monetary damages, the FTC must also show that he “had 

actual knowledge of material misrepresentations, [was] recklessly indifferent to the truth or 

falsity of a misrepresentation, or had an awareness of a high probability of fraud along with 

an intentional avoidance of the truth.” Id. at 1171 (citations omitted). Although fraud must 

be pled with specificity, “[m]alice, intent, knowledge, and other conditions of a person’s 

mind may be alleged generally.” Fed. R. Civ. P. 9(b). Circumstantial evidence regarding 

the individual’s “degree of participation in business affairs is probative of knowledge.” 

FTC v. Amy Travel Serv., Inc., 875 F.2d 564, 574 (7th Cir. 1989). 

Here, the allegations of the Complaint are sufficient to support a claim of individual 

liability against Frere. In arguing to the contrary, Defendants rely almost exclusively on 

FTC v. Swish Marketing, No. C 09-03814 RS, 2010 WL 653486 (N.D. Cal. Feb. 22, 2010), 

which they contend involved allegations “remarkably similar” to those at issue in this case. 

Mot. at 11. As discussed below, however, the comparison is inapt. In Swish, the court 

found individual liability insufficiently pled where it was alleged only that (a) the 

individual defendant, Benning, was the CEO of the corporation; and (2) “[c]onsumers [had] 

filed complaints” with the defendants, the BBB, and law enforcement. Swish, 2010 WL 

653485, at *5-6. Here, the allegations of the Complaint are more robust. 

Specifically, in addition to allegations regarding Frere’s founding, incorporation, and 

majority ownership of the Companies, it is alleged that he has served as the CEO, 

Secretary, CFO, and sole Director of each entity since its incorporation. Compl. ¶¶ 9, 39-

41. He was also the signatory on AFBC’s and Ameritech’s bank accounts. Id. ¶ 42. 

Frere’s founding of the Companies and assumption of all leadership roles therein evidences 

his involvement in both their high-level and day-to-day management. Frere also signed 

contracts with consumers as a “Managing Director.” Id. ¶ 39. This further evidences his 

day-to-day involvement in the business and the very activities that form the basis of 

Defendants’ liability. Finally, as a liaison to the BBB, Frere was advised of consumer 

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complaints, including claims that consumers were wrongly led to believe that payments to 

the Companies were applied toward their loan balances. Id. ¶ 43. This tends to show that 

Frere was aware of consumer confusion caused by the Companies’ representations.5 

Thus, unlike in Swish, allegations regarding Frere’s degree of participation in the 

Companies’ business affairs are sufficient to support the inference that he knew of or was 

recklessly indifferent to the purported misrepresentations. See Swish, 2010 WL 653485, at 

*6 (dismissing the complaint, but noting that, “[a]dditional facts such as the number of 

consumers who complained directly to Benning, or the size and structure of Swish 

reflecting senior management involvement might render any amended complaint 

adequate”); see also OMICS Grp., 302 F. Supp. 3d at 1193 (finding individual liability 

adequately alleged on motion for preliminary injunction where the defendant was the 

founder, principal, and owner of the corporate defendants, had signatory authority over 

their financial accounts, and served as the “CEO and Managing Director” of the parent 

company). Indeed, the Swish court denied a subsequent motion to dismiss after the FTC 

amended its complaint to allege, among other things, that Benning served as one of only 

three corporate directors and received emails regarding customer complaints. FTC v.

Benning, No. C 09-03814 RS, 2010 WL 2605178, at *2, 5-6.6 

Accordingly, at this stage of the litigation, the allegations of the Complaint are 

sufficient to support a claim of individual liability against Frere. 

5

 Although Frere asserts that there is no evidence he received or responded to the 

BBB’s communications, such factual matters are not properly resolved on a motion to 

dismiss. Benning, 2010 WL 2605178, at *5. 

6

 The only other authorities cited by Defendants were decided at later stages of the 

litigation. See Mot. at 12 (citing Publ’g Clearing House, 104 F.3d at 1171 (affirming 

summary judgment); Amy Travel Service, 875 F.2d at 573-75 (affirming judgment after 

trial)). It is therefore unsurprising that claims of individual liability were supported by 

additional evidence in those actions. E.g., Amy Travel Service, 875 F.2d at 574-75

(wherein the court noted that, in addition to being the principal shareholders and officers of 

the closely held corporations, the individual defendants wrote the deceptive sales scripts 

and were aware of a high volume of customer complaints and chargebacks). 

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C. APPLICABILITY OF THE TSR 

The TSR prohibits deceptive or abusive telemarketing acts or practices, including 

certain acts or practices by sellers or telemarketers of any “debt relief service.” 16 C.F.R. 

§§ 310.3(a)(2)(x) & 310.4(a)(5)(i). Counts Two and Three of the Complaint allege that 

Defendants engage in such abusive or deceptive acts or practices by, respectively, 

(a) requesting or receiving advance fees for any debt relief service, and (b) misrepresenting 

material aspects of any debt relief service. 

Defendants move to dismiss Counts Two and Three on the ground that the FTC has 

not adequately alleged that the Companies provide a “debt relief service.” Defendants 

argue that, although the Complaint “summarily contends” that the Companies provide debt 

relief services, the mailers attached thereto demonstrate that they merely provide document 

preparation and processing services for a fee. Mot. at 12; id. at 13 (citing Compl. Ex A-1 

(“AF Student Services provides document preparation and processing services for a fee.”), 

Exs. C & D-1 (“Company provides document preparation and processing services for a 

fee.”)). Relying on FTC v. PSC Administrative, LLC, No. CV 15-0084-WS-B, 2016 WL 

3406113, at *10 (S.D. Ala. June 17, 2016), Defendants assert that the FTC’s “failure to 

address these disclaimers and adequately describe the Companies’ businesses requires 

dismissal of the TSR claims.” Mot. at 13. Defendants’ argument is without merit. 

The TSR defines a debt relief service in “broad terms.” CFPB v. IrvineWebWorks, 

Inc., NO. SACV 14-1967 JVS (ANx), 2016 WL 1056662, at *6 (C.D. Cal. Feb. 5, 2016). 

Specifically, a “debt relief service” encompasses “any program or service represented, 

directly or by implication, to renegotiate, settle, or in any way alter the terms of payment or 

other terms of the debt between a person and one or more unsecured creditors or debt 

collectors, including, but not limited to, a reduction in the balance, interest rate, or fees 

owed by a person to an unsecured creditor or debt collector.” 16 C.F.R. § 310.2(o). 

Defendants’ services fall within this definition, as they purport to alter the terms of 

payment or other terms of consumers’ debt. Indeed, as alleged by the FTC, Defendants 

represent their services as “Student Loan Payment Reduction & Forgiveness.” Compl. 

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Ex. C; id. Exs. D-1 & E-1; see also id. Ex. B-1 (“Due to the current status of your student 

loans, your pre-qualification may allow you to reduce your current monthly payments of 

approximately $480 down to as low as $60, and you may also qualify for complete 100% 

total loan forgiveness with other available programs.”). 

Defendants’ characterization of their services as mere document preparation and 

processing, to the exclusion of any service defined as debt relief under the TSR, is 

unavailing. Although Defendants’ mailers label their services as “document preparation 

and processing services for a fee,” the FTC rightly notes that the fine-print disclaimers cited 

by Defendants only appear after the mailers have advertised the aforementioned loan 

forgiveness and payment reduction services. Moreover, the language of the disclosures 

does not contradict the mailers’ broader representations regarding the services offered. 

While Defendants now imply that document preparation and processing services are 

necessarily discrete from any debt relief service, that assertion is unsupported and, in fact, 

belied by the Companies’ own representations. See Compl., Ex. A-1 (“You have been Pre -

Qualified to reduce your student loan payments through the Student Loan Document 

Preparation and Processing Services Program.”) (emphasis added). 

In view of the forgoing, Defendants’ reliance on PSC Administrative is likewise 

unavailing. Defendants rely on that case in support of the proposition that the FTC 

inadequately addresses the “threshold, ‘debt relief service’ issue.” Reply at 8-9 (quoting 

PSC Administrative, 2016 WL 3406113, at *10). But for purposes of the pleading stage, 

the FTC adequately alleges facts showing that Defendants are sellers or telemarketers of 

debt relief services. Cf. PSC Administrative, 2016 WL 3406112, at *10 (denying the 

FTC’s motion for summary judgment on the ground that it had not adequately shown that 

the defendants represented their payday loan validation services—which did not actually 

renegotiate, settle, or otherwise alter the terms of the loans—as a debt relief service). The 

Complaint and the exhibits attached thereto allege facts that, on their face, fall within the 

debt relief provisions of the TSR. The FTC need not allege anything further. 

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Finally, other courts have found that similar “student loan debt relief” operations fall 

under the purview of the debt relief provisions of the TSR. See, e.g., IrvineWebWorks, 

2016 WL 1056662, at *2, 6-7 (finding that the defendant provided debt relief services 

subject to the TSR where it purported “to assist consumers identify and apply for various 

Department of Education repayment plans, ensure proper assignment in federal programs, 

and help consumers meet recertification requirements”). In so finding, the court noted that 

the TSR’s debt relief service provisions were designed to combat the very harms that the 

defendant’s practices were likely to inflict, and that the policies behind the debt relief 

provisions thus applied to cover the defendant’s services. Id., at *6-7 & n.3 (quoting 75 

Fed. Reg. 48458 at 48484-5 (“In many cases, providers misrepresent or fail to disclose 

material aspects of their programs, causing consumers to make payments to the providers 

for several months, not realizing that most of the payments go toward fees, rather than 

settlement offers.”)). The same is true here, where it is alleged that Defendants 

misrepresented or failed to disclose material aspects of their programs, causing consumers 

to believe that payments to the Companies were being applied toward their loan balances. 

Accordingly, the Complaint adequately alleges that the Companies provide “debt 

relief services.” 

D. ADVANCE FEE VIOLATIONS 

Defendants further argue that, even if the TSR applies, Count Two should be 

dismissed because the Companies did not violate the TSR’s advance fee provision. As 

discussed below, this argument is unavailing. 

The TSR prohibits sellers and telemarketers from engaging in abusive telemarketing 

acts or practices, including “requesting or receiving payment of any fee or consideration for 

any debt relief service” until certain conditions are met. 16 C.F.R. § 310.4(a)(5)(i). 

Provided that various safeguards are utilized, however, the TSR does not prohibit sellers or 

telemarketers from “requesting or requiring the customer to place funds in an account to be 

used for the debt relief provider’s fees and for payments to creditors or debt collectors in 

connection with the renegotiation, settlement, reduction, or other alteration of the terms of 

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payment or other terms of a debt.” Id. § 310.4(a)(5)(ii). The TSR requires that: (A) the 

funds are held in an account at an insured financial institution; (B) the customer owns the 

funds and is paid any accrued interest; (C) the entity administering the account is not 

owned or controlled by, or in any way affiliated with, the debt relief service; (D) the entity 

administering the account does not give or accept any money or other compensation in 

exchange for referrals of business involving the debt relief service; and (E) the customer 

may withdraw from the debt relief service at any time without penalty, and must receive all 

funds in the account, less any funds earned by the debt relief service in compliance with 

§ 310.4(a)(5)(i). Id.7 

Defendants argue that, although “[t]he FTC alleges that the Companies obtain 

payment up front, Exhibit G shows that the funds are held by a third party at an FDICinsured financial institution. See Ex. G. at G-8. It is indisputable that the TSR permits 

companies to require the consumer to deposit funds into an escrow account to be used to 

pay fees, so long as certain safeguards are in place. Those include use of a third party 

escrow account.” Mot. at 15 (emphasis added). Exhibit G contains consumer contract 

excerpts that include the following language: “Dedicated Savings Account: Member 

understands that Member is solely in control of all savings funds for the purpose of 

paying the fees due for the Membership Plan. Member will designate an account for 

program savings funds and such dedicated account is independent from FEBC.” Compl., 

Ex. G-8 (emphasis in original). 

As set forth above—and implicitly acknowledged by Defendants—use of a third 

party escrow account is but one of several requirements imposed by the TSR. Setting aside 

the questions of whether escrow accounts were established for each consumer and for all 

advanced fees charged by the Companies (not just “the fees due for the Membership Plan”), 

7 Sellers and telemarketers must also “disclose truthfully, in a clear and conspicuous 

manner” that “the customer owns the funds held in the account, the customer may withdraw 

from the debt relief service at any time without penalty, and if the customer withdraws, the 

customer must receive all funds in the account, other than funds earned by the debt relief 

service in compliance with § 310.4(a)(5)(i)[].” 16 C.F.R. § 310.3(a)(1)(viii)(D). Failure to 

make such disclosures constitutes a deceptive telemarketing act or practice. Id. 

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Exhibit G falls short of establishing that the Companies satisfy all of the requirements of 

the TSR.8

 Of particular note is the allegation that Defendants often do not provide refunds 

to consumers upon demand. Exhibit G therefore does not contradict the Complaint’s 

allegation of advance fee violations. 

Accordingly, Defendants have not shown that Count Two is subject to dismissal. 

IV. CONCLUSION

For the reasons stated above, IT IS HEREBY ORDERED THAT: 

1. Defendants’ motion to dismiss is DENIED. 

2. This Order terminates Docket 117. 

IT IS SO ORDERED. 

Dated: 08/08/2018 ______________________________ 

SAUNDRA BROWN ARMSTRONG 

Senior United States District Judge 

8 In their reply, Defendants add that they “clearly disclosed the consumer’s 

ownership of the funds in the dedicated account.” Reply at 10. Setting aside the questions 

of whether Exhibit G’s language is clear and conspicuous and included in all consumer 

contracts, however, the Court notes that the language fails to fully satisfy the TSR’s 

disclosure requirements. As set forth above, the seller or telemarketer must not only advise 

consumers of their ownership of the funds, but must also advise them of their right to 

withdraw from the debt relief service at any time without penalty and to be returned the 

funds. 16 C.F.R. § 310.3(a)(1)(viii)(D). The cited contractual language does not include

all of the requisite disclosures. 

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