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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 1 of 20 

ALDEN F. ABBOTT 

Acting General Counsel 

SARAH SCHROEDER, Cal. Bar No. 221528 

ROBERTA TONELLI, Cal. Bar No. 278738 

EVAN ROSE, Cal. Bar No. 253478 

Federal Trade Commission 

901 Market Street, Suite 570 

San Francisco, CA 94103 

sschroeder@ftc.gov, rtonelli@ftc.gov, erose@ftc.gov 

Tel: (415) 848-5100; Fax: (415) 848-5184 

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF CALIFORNIA 

OAKLAND DIVISION 

 

Plaintiff, 

vs. 

AMERICAN FINANCIAL BENEFITS CENTER, 

a corporation, also d/b/a AFB and AF STUDENT 

SERVICES; 

AMERITECH FINANCIAL, a corporation; 

 

FINANCIAL EDUCATION BENEFITS CENTER,

a corporation; and 

BRANDON DEMOND FRERE, individually and 

as an officer of AMERICAN FINANCIAL 

BENEFITS CENTER, AMERITECH 

FINANCIAL, and FINANCIAL EDUCATION 

BENEFITS CENTER,

 

Defendants

FEDERAL TRADE COMMISSION, 

Case No. 18-cv-00806-SBA 

Related Case: 4:17-cv-04817-SBA 

FEDERAL TRADE COMMISSION’S

REPLY IN SUPPORT OF MOTION 

FOR PRELIMINARY INJUNCTION 

Date: May 9, 2018

Time: 1:00 p.m. 

Location: Courtroom 210 

1301 Clay Street, 2nd Floor 

Oakland, CA 94612 

Judge: Hon. Saundra Brown 

 Armstrong 

. 

Reply in Support of Motion for Preliminary Injunction 

4:18-CV-00806-SBA
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 2 of 20 

TABLE OF CONTENTS 

TABLE OF AUTHORITIES ...................................................................................................... iii 

I. INTRODUCTION................................................................................................................. 1 

II. A PRELIMINARY INJUNCTION IS NEEDED TO PREVENT ONGOING HARM . 1 

A. Defendants Continue to Violate the FTC Act and the TSR .................................... 1 

1. Defendants Continue to Misrepresent Their Services and Fees...................... 1 

2. Defendants Continue to Mislead Consumers Regarding Family Size ............ 2 

3. Defendants Continue to Collect Funds From Deceived Consumers ............... 3 

B. Voluntary Cessation Is Not Sufficient to Avoid a Preliminary Injunction............. 4 

III. PLAINTIFF MET THE STANDARD FOR A PRELIMINARY INJUNCTION......5 

A. Plaintiff Is Likely to Succeed on the Merits............................................................... 5 

1. Defendants’ Misrepresentations Violate the FTC Act and the TSR............... 5 

a) Defendants’ Disclaimers Are Insufficient.................................................. 6 

(1) Buried and Unclear Contract Disclaimers........................................ 6 

(2) Ineffective Website Disclaimers......................................................... 7 

(3) Deficient “Verification”...................................................................... 8 

2. Defendants Collect Advance Fees in Violation of the TSR .............................. 8 

a) Defendants’ Use of Escrow Accounts Runs Afoul of the TSR ................. 8 

B. The Equities Weigh in Favor of a Preliminary Injunction ...................................... 9 

C. The Requested Relief Is Appropriate....................................................................... 10 

D. Defendants’ Timeliness Argument Is Without Merit............................................. 11 

Reply in Support of Motion for Preliminary Injunction Page i 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 3 of 20 

IV. DEFENDANTS OMIT AND OBSCURE KEY INFORMATION.............................. 12 

A. Defendants Ignore Their Misrepresentations Regarding Family Size ................. 12 

B. Defendants Advertise Primarily Through Deceptive Mailers ............................... 13 

C. Defendants’ Use of Scripts and Compliance Processes Are Flawed ..................... 13 

D. Defendants Use Loan Servicers as Scapegoats........................................................ 14 

E. Plaintiffs’ Declarants Provide Valuable and Credible Evidence........................... 14 

1. The Better Business Bureau............................................................................... 14 

2. Great Lakes ........................................................................................................ 15 

3. Consumer and Former Employee Declarants................................................. 15 

V. CONCLUSION ................................................................................................................... 15 

Reply in Support of Motion for Preliminary Injunction Page ii 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 4 of 20 

TABLE OF AUTHORITIES 

Cases

CFTC v. British Am. Commodity Options Corp., 560 F.2d 135 (2d Cir. 1977) ............................. 9 

FTC v. Affordable Media, LLC, 179 F.3d 1228 (9th Cir. 1999)..................................................... 4 

FTC v. Alliance Document Prep., No. 17-7048, slip op.(C.D. Cal. Nov. 2, 2017) ........................ 7 

FTC v. Am. Standard Credit Sys., Inc., 874 F. Supp. 1080 (C.D. Cal. 1994)................................. 4 

FTC v. Cyberspace.com LLC, 453 F.3d 1196 (9th Cir. 2006)........................................................ 6 

FTC v. Gill, 71 F. Supp. 2d 1030 (C.D. Cal. 1999)........................................................................ 7 

FTC v. H.N. Singer, 668 F.2d 1107 (9th Cir. 1982) ....................................................................... 4 

FTC v. Sage Seminars, Inc., 1995-2 Trade Cas. (CCH) ¶ 71,256, 1995 U.S. Dist. LEXIS 21043 

(N.D. Cal. 1995).......................................................................................................................... 4 

FTC v. Sterling Precious Metals, LLC, 894 F. Supp. 2d 1378 (S.D. Fla. 2012) ............................ 6 

FTC v. Thomsen-King & Co., 109 F.2d 516 (7th Cir. 1940).......................................................... 9 

FTC v. Your Magazine Provider, Inc., No. CV 08-64-M-DWM, 2009 WL 10677698 (D. Mont. 

2009) ........................................................................................................................................... 4 

Resort Car Rental Sys., Inc. v. FTC, 518 F.2d 962 (9th Cir. 1975)............................................ 7, 8 

SEC v. Koracorp Indus., Inc., 575 F.2d 692 (9th Cir. 1978).......................................................... 4 

SEC v. Mgmt. Dynamics, Inc., 515 F.2d 801 (2d Cir. 1975) .......................................................... 5 

United States v. Brien, 617 F.2d 299 (1st Cir. 1983)...................................................................... 6 

Statutes

15 U.S.C. § 45(a).............................................................................................. 5 

15 U.S.C. § 53(b) ..............................................................................................4 

16 C.F.R. §§ 310.3(a)(2)(vii), (x)........................................................................... 5 

Reply in Support of Motion for Preliminary Injunction Page iii 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 5 of 20 

I. INTRODUCTION 

Plaintiff has put forth evidence laying bare Defendants’ scheme. Defendants continue to 

profit by misrepresenting that consumers qualify for plans that will permanently lower their 

monthly loan payments and/or lead to loan forgiveness, and that consumers’ monthly payments 

to Defendants will be applied towards consumers’ student loan balances. Plaintiff requests the 

Court stop the continuing harm to consumers by granting its motion for preliminary injunction.1 

II. A PRELIMINARY INJUNCTION IS NEEDED TO PREVENT ONGOING HARM 

Injunctive relief is needed to prevent ongoing harm during the pendency of litigation.2 

Defendants would like the Court to believe that any possible wrongdoing is in their past. This 

contention is belied by evidence showing ongoing bad conduct by Defendants. Moreover, even 

if Defendants had ceased past illegal practices, voluntary cessation of past bad behavior is not 

sufficient to avoid a preliminary injunction. 

A. Defendants Continue to Violate the FTC Act and the TSR 

Much of Defendants’ argument hinges on claims that they have improved their practices. 

However, evidence shows that Defendants continue to (1) misrepresent their services and fees to 

consumers, (2) mislead consumers regarding the appropriate family size to list on income-driven 

repayment (“IDR”) program applications, and (3) benefit from their past deception. 

1. Defendants Continue to Misrepresent Their Services and Fees 

Defendants continue to misrepresent their services and fees in order to induce consumers 

to enroll in their programs.3

 When Defendants first discuss “program” payments with 

consumers, Defendants lump together the document preparation fee, the membership enrollment 

1

 Declarations are cited by the last name of the declarant and the paragraph of the declaration, or 

by reference to the specific attachment. The declaration of Kelly Ortiz submitted with this Reply 

is referenced as “Ortiz II.” 

2

 While Plaintiff believes that the Court has the necessary information to rule based on the 

evidence submitted, if the Court would like to hear witness testimony at the PI hearing, Plaintiff 

suggests that limiting each side to two witnesses would allow sufficient testimony without overly 

taxing the Court’s time. 

3

 One client who enrolled with Defendants earlier this month was given the impression that 

Defendants would pass along his payments to his loan servicer and was surprised to learn that he 

was enrolled in a “financial education” membership program. Belnap ¶¶ 9-10, 12. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 6 of 20 

fee, the monthly “financial benefits” membership fee, and the escrow account management fee, 

along with the consumer’s projected student loan payment.4 Only later in the lengthy enrollment 

calls do the sales agents break down these fees (if they do so at all).5 

Indeed, Defendants’ own evidence demonstrates that they fail to disclose the FEBC 

program to consumers. Neither of the scripts that Defendants provided to the Court includes 

language explaining the FEBC program or treating the FEBC program as an “optional upsell.”6 

In the call recordings and transcripts selected by Defendants as examples of their fulsome 

disclosures, sales representatives consistently fail to provide consumers with details about the 

FEBC program.7 Defendants have also never advertised their “financial education” benefits 

program in their mailers and do not mention the program on their website.8 Consumers are not 

expecting to be enrolled in such a program when they call for student loan assistance. 

2. Defendants Continue to Mislead Consumers Regarding Family Size 

The FTC has shown that Defendants have misled consumers about who may be included 

in their “family size” on IDR program applications.9 Defendants have continued this practice.10 

An unknown numbers of consumers may be unwittingly enrolled in an IDR program for which 

they do not qualify. This Court should take action to stop Defendants from improperly enrolling 

4

 Vorhis Ex. 14 at 15:10-19:4, Ex. 16 at 10:25-14:25, Ex. 18 at 25:3-26:15; see Ortiz II Atts. I, J 

at 19:10-13 (trainer instructs trainee: “It’s not our program, it’s the program.”).

5 See, e.g., Vorhis Ex. 16 (Sales agent provides consumer with combined payment amounts at 

page 12 of the transcript, but does not break this down into its components until page 44.). 

6

 In Cutter Ex. 3, “FEBC” is mentioned first at page 10 of 12. In Cutter Ex. 4, “FEBC” is 

mentioned first at page 3 of 3. Neither script includes a description of the program. Until 

recently, the FEBC website represented that it provided benefits through New Benefits. Ortiz II 

Att. N. But, since August 2017, FEBC has enrolled only 6 people. Vasquez ¶¶ 2, 4, Att. A.

7

 Vorhis Ex. 14 at 17:20-18:2, 43:9-24 (Consumer is told that monthly FEBC program fee goes 

to “Ameritech Financial”; discussion of the program late in the call is limited to a reference to 

“the membership benefits portion of our company.”), Ex. 16 at 12:17-13:16, 44:11-45:5 (Sales 

agent lumps FEBC monthly fee into “program” costs; there is no substantive discussion of the 

program.), Ex. 30 at 10:16-11:4 (FEBC program referenced as a free perk: “part of our service, 

you also get a, a, an account that’s basically set up with LifeLock identity theft protection . . . .”). 

8

 Bussewitz Att. A; Holmes Att. A; Ortiz II ¶ 7, Att. D, Ortiz Atts. O-Q, S; Stiner Atts. F- H, QQ. 

9

 PI Mot. at 7-8; see infra 12 n.57. 

10 Belnap ¶ 7 (declaration of consumer enrolled with Defendants on April 2, 2018). 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 7 of 20 

11 more consumers.

Defendants cannot be trusted to provide consumers with accurate information about the 

family size definition.12 Although Defendants contend that their sales representatives read only 

what is in the sales scripts, the evidence shows otherwise. Defendants’ former employees reveal 

that Defendants trained and encouraged sales agents to manipulate clients into providing an 

inflated family size.13 Defendants’ own evidence demonstrates this practice. In a compliance 

audit cited by Defendants in their Opposition, the sales agent was congratulated because he 

apparently “[g]ave good examples” of family size, even though Defendants’ script does not 

provide any examples.14 This audit supports the ample evidence showing that Defendants’ sales 

representatives routinely embellished the script and told consumers that they could include 

nearly anyone as a family member in their IDR program applications.15 

3. Defendants Continue to Collect Funds From Deceived Consumers 

Defendants continue to receive monthly payments for their “financial education” program 

from consumers enrolled in the past by AFBC and FEBC. As Plaintiff demonstrated in its 

Motion for Preliminary Injunction (“PI Motion”), Defendants induce unknowing consumers to 

enroll in these “financial education” programs and continue to charge consumers monthly for the 

life of their loans.16 Defendants thus continue to collect money from consumers who they misled 

months or years ago. Without the requested receiver – with authority to assess whether and to 

11 “[S]tudent loan servicers questioned the family size figures for some of Ameritech’s clients 

and were denying applications right and left.” Kinney ¶ 10. 

12 Even sales representatives who Defendants laud in their Opposition mislead consumers 

regarding family size. Vorhis Exs. 13 and 14 show a call between sales agent Michael Becerra 

and a consumer. Ortiz II Atts. E and F include an enrollment call between a consumer and 

“Michael,” the sales agent. The sales agent’s voice on this recording sounds to be the same as 

that in Vorhis Ex. 13. The sales agent states: “So, for example, me and my wife, we live alone 

and we do not have any children, but I claim a family size of nine because I donate to afterschool 

programs to help my cousins out.” Ortiz II Att. F at 11:2-12:5; see Ortiz II Att. H at 8:10-11:16. 

13 Ortiz II Att. J at 7:23-8:9 (in a recorded training session, the trainer instructs the trainee to 

“[j]ust say yes” in a situation where a consumer asks if they can count a certain person in their 

family size); Cretcher ¶ 7; Stalick ¶¶ 6-8; Zaorski ¶ 6; Hamilton ¶¶ 10-11; Martinez ¶¶ 8-9. 

14 Compare Gangnath Ex. 1 at 1, with Cutter Ex. 3 at 2, and Cutter Ex. 4 at 2. 

15 Gangnath Ex. 1 at 1; see infra 12 n.57; Ortiz II Att. F at 11:2-12:5. 

16 PI Mot. at 10-12. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 8 of 20 

what extent these charges are appropriate – Defendants will continue to reap unjust rewards. 

B. Voluntary Cessation Is Not Sufficient to Avoid a Preliminary Injunction 

A preliminary injunction would be necessary even if Defendants had in fact ceased their 

unlawful practices. To avoid injunctive relief, Defendants “must show that subsequent events 

have made it absolutely clear that the allegedly wrongful behavior cannot reasonably be expected 

to recur.”17 See Affordable Media, 179 F.3d at 1238 (internal quotations and alteration omitted). 

Their Opposition falls far short of this “stringent” burden. See id. Voluntary cessation “is 

unlikely to moot the need for injunctive relief [because] the defendant could simply begin the 

wrongful activity again.” Id. True to that principle, Defendants here could reinstate their 

allegedly abandoned – and presumably more lucrative – practices virtually overnight.18 

On top of that, Defendants made the bulk of their claimed improvements to their 

marketing only after learning of the FTC’s investigation. “As such, any cessation on the part of 

[Defendants] can hardly be considered ‘voluntary.’” See FTC v. Sage Seminars, Inc., 1995-2 

Trade Cas. (CCH) ¶ 71,256, 1995 U.S. Dist. LEXIS 21043, at *16 (N.D. Cal. 1995).19 

Defendants’ past conduct also weighs heavily against them. As the Ninth Circuit has 

observed, “An inference arises from illegal past conduct that future violations may occur.” SEC 

v. Koracorp Indus., Inc., 575 F.2d 692, 698 (9th Cir. 1978); see also SEC v. Mgmt. Dynamics, 

17 Contrary to Defendants’ assertion (see Opp. at 22), the FTC proceeds here under the second 

proviso of Section 13(b). 15 U.S.C. § 53(b). Cases brought under this proviso are not subject to 

the conditions set forth in the first proviso of Section 13(b) for the issuance of a preliminary 

injunction in aid of administrative proceedings. FTC v. H.N. Singer, 668 F.2d 1107, 1111 (9th 

Cir. 1982). In such cases, “it is actually well-settled ‘that an action for an injunction does not 

become moot merely because the conduct complained of was terminated, if there is a possibility 

of recurrence, since otherwise the defendant[s] would be free to return to [their] old ways.’” 

FTC v. Affordable Media, LLC, 179 F.3d 1228, 1237 (9th Cir. 1999) (emphasis original) 

(quoting FTC v. Am. Standard Credit Sys., Inc., 874 F. Supp. 1080, 1087 (C.D. Cal. 1994)).

18 Indeed, there is some limited evidence that Defendants have explored ways to continue their 

violative practices. Kinney ¶ 14. There is also some evidence indicating that Defendants 

maintain offices outside of the United States. Martin ¶ 8; Ortiz Att. X at 2. Without a receiver, 

Defendants might be able to continue bad practices through their foreign outposts. 

19 FTC v. Your Magazine Provider, Inc., No. CV 08-64-M-DWM, 2009 WL 10677698 (D. Mont. 

2009), did not weigh “prior corrective actions,” see id. at *2–4 (FTC failed to show likelihood to 

succeed on merits), and the facts relating to the alleged no-cancellation policy are irrelevant here. 

Reply in Support of Motion for Preliminary Injunction Page 4

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 9 of 20 

Inc., 515 F.2d 801, 807 (2d Cir. 1975) (“[T]he commission of past illegal conduct is highly 

suggestive of the likelihood of future violations.”). 

III. PLAINTIFF HAS MET THE STANDARD FOR A PRELIMINARY INJUNCTION 

The parties agree that, to obtain a preliminary injunction, the FTC must show a likelihood 

of success on the merits and that the equities weigh in favor of granting the relief requested.20 

Plaintiff has met this threshold. Moreover, the relief requested by Plaintiff is appropriate given 

the allegations and supporting evidence. Finally, none of Defendants’ baseless arguments about 

the timing of this action impacts the Court’s ability to order the requested relief. 

A. Plaintiff Is Likely to Succeed on the Merits 

1. Defendants’ Misrepresentations Violate the FTC Act and the TSR 

Plaintiff is likely to prevail on the merits in showing that Defendants have made repeated 

material misrepresentations to consumers. Plaintiff has submitted compelling evidence showing 

that Defendants have deceived consumers regarding at least two aspects of their business: (1) 

that consumers qualify for plans that will permanently lower their monthly loan payments and/or 

lead to loan forgiveness; and (2) that consumers’ monthly payments to Defendants will be 

applied towards consumers’ student loan balances.21 These misrepresentations violate the FTC 

Act’s bar on “deceptive acts or practices in or affecting commerce” and the Telemarketing Sales 

Rule’s (“TSR”) provisions prohibiting debt relief sellers or telemarketers from misrepresenting 

any material aspect of their services. 15 U.S.C. § 45(a); 16 C.F.R. §§ 310.3(a)(2)(vii), (x). 

Defendants dismiss the overwhelming evidence of wrongdoing by arguing that the FTC 

has shown merely that “a few” customers were deceived, not that it was happening “on the 

whole.”22 However, the FTC’s evidence shows pervasive problems with Defendants’ print ads, 

20 PI Mot. at 16; Opp. at 16.

21 Cretcher ¶¶ 8-10 (“The cost for our program was approximately $50 a month . . . . Consumers 

thought that this fee was for not having to make their student loan payments.”); Zaorski ¶¶ 8-9 

(“Nor did the script clearly state to clients whether any of their money went to loan payments.”); 

Martin ¶ 5 (“We were encouraged to hide in the jargon, the fact that none of the payment was 

actually going to the loan servicer.”).

22 See Opp. at 21. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 10 of 20 

sales calls, treatment of family size, and disclosure of FEBC fees.23 Defendants’ own evidence 

undermines their position – they admit that 10% of their customers request refunds.

24 Given 

that many consumers do not learn of Defendants’ misrepresentations for months or years, one 

can presume that even more consumers would be displeased if they were made aware of 

Defendants’ scheme. Defendants’ figures also indicate that over 20,000 of their consumers have 

not been enrolled in any government loan program.25 This is more than half of the clients the 

Corporate Defendants have worked with over their lifetimes. 

a) Defendants’ Disclaimers Are Insufficient 

Defendants do not cure their misrepresentations with the supposed disclaimers in their 

contracts, on their website, or during the “verification” portion of their enrollment calls. Each of 

these methods is legally insufficient. 26 Moreover, as demonstrated by the hundreds of 

complaints from consumers who believed Defendants’ misrepresentations, Defendants’ late 

disclaimers are ineffective.27 See FTC v. Cyberspace.com LLC, 453 F.3d 1196, 1201 (9th Cir. 

2006) (Proof that representation actually deceived consumers is “highly probative to show that a 

practice is likely to mislead consumers acting reasonably under the circumstances.”). 

(1) Buried and Unclear Contract Disclaimers 

During the enrollment calls, Defendants email consumers lengthy contracts and pressure 

them to sign the documents electronically.28 It is not plausible that consumers are able to read 

the fine print while being rushed through the document during a call.29 Even if consumers were 

23 PI Mot. at 5-12; Ortiz II Atts. A, C (providing additional and new consumer complaints). 

24 Novak ¶ 8; see also United States v. Brien, 617 F.2d 299, 307-08 (1st Cir. 1983) (where 

misleading sales techniques are at issue, actual consumer complaints represent only the “tip of 

the iceberg” when it comes to consumer deception). 

25 See infra, Section III.B.

26 In FTC v. Sterling Precious Metals, LLC, 894 F. Supp. 2d 1378 (S.D. Fla. 2012), the court 

focused on admissions by consumer witnesses indicating that they understood the allegedly 

undisclosed investment risks. Id. at 1383. This fact-specific analysis does not apply here. 

27 Ortiz ¶ 48, Atts. EE-HH; Ortiz II Atts. A, C; Stiner Att. A. 

28 Defendants repeatedly cite the same contract language to show that consumers understood that 

they needed to pay their loan servicers directly. Opp. at 7, 11, 12 n.52. This language is buried 

in the agreements. See, e.g., Cutter Ex. 5 at 27; Archibald Att. B at 32. 

29 See, e.g., Cutter Exh. 3 at 12 (“[T]he software will advance you to the next area where you’ll 

need to apply your initials . . . .”). 

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able to read the agreement, providing fine print disclosures after the initial deception (via the 

mailer and the sales call) is not sufficient to cure the FTC Act violation. See Resort Car Rental 

Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 1975); FTC v. Gill, 71 F. Supp. 2d 1030, 1044 

(C.D. Cal. 1999) (disclaimer in a contract that “consumers eventually sign” is insufficient as “the 

disclaimer is not included in the representations”), aff’d, 265 F.3d 944 (9th Cir. 2001); FTC v. 

Alliance Document Prep., No. 17-7048, slip op. at *10-11 (C.D. Cal. Nov. 2, 2017). 

Further, the fine print that Defendants rely on is confusing and unclear.30 Nowhere does 

it say that the consumer needs to continue to pay their loan servicer. It simply states: “I AM 

RESPONSIBLE FOR MAKING MY PAYMENTS.” However, consumers did believe they 

were making their loan payments when they paid Defendants;31 this contract language, even if 

read, would not have alerted them otherwise. 

(2) Ineffective Website Disclaimers 

Defendants also point to their website disclosures to relieve them of culpability.32 Yet, 

Defendants admit that their mailers, not their website, are their primary source of consumers.33 

For the vast majority of Defendants’ time in business, their mailers gave only a phone number, 

and did not provide the company name or website,34 preventing consumers from visiting 

Defendants’ website prior to their initial enrollment call. 

30 Defendants repeatedly cite excerpted disclaimer language; the full sentences state: 

“I HEREBY ACKNOWLEDGE THAT I HAVE NOT BEEN ADVISED BY AMERITECH 

FINANCIAL, ANY OF ITS AGENTS, AND/OR AFFILIATES TO FOREGO A 

STUDENT LOAN PAYMENT IN EXCHANGE FOR THE GOOD FAITH PAYMENT 

AND FEDERAL STUDENT LOAN CONSOLIDATION PROGRAM. DURING THIS 

PROCESS, I AM RESPONSIBLE FOR MAKING MY PAYMENTS, AND FAILURE TO 

DO SO COULD DISQUALIFY ME/US FROM OBTAINING THE SERVICE THAT WAS 

AGREED UPON.” Cutter Ex. 5 at 27 (emphasis in original). 

31 See, e.g., Belnap ¶ 10; Carbonneau ¶ 5; Emerson ¶ 10; Olds ¶¶ 4-5; Sills ¶ 2, 4. 

32 Defendants accuse Plaintiff of offering “inaccurate” evidence regarding a pop-up disclaimer 

on the Ameritech website. This is simply false. Ortiz Att. O is a video capture of the website 

and does indeed show the pop-up disclaimer on the website. 

33 Cutter ¶ 4. 

34 Cutter ¶¶ 4, 15 (Defendants added their name to their mailers in December 2017.), Ex. 1; Ortiz 

II ¶ 7, Att. D. 

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(3) Deficient “Verification” 

Defendants’ after-the-fact disclosures during the “verification” are insufficient. See 

Resort Car Rental Sys., 518 F.2d at 964. Defendants read these in a quick and monotone 

fashion35 at the end of long calls and after consumers have already signed the contract.36 

2. Defendants Collect Advance Fees in Violation of the TSR 

Likewise, Plaintiff is likely to prevail in showing that Defendants collect advance fees in 

violation of the TSR. Defendants rely on their own misguided reading of the TSR to conclude 

that “[s]tudent loans were never meant to fall under the debt relief provisions of the TSR.”37 

Defendants are incorrect – a number of courts have found that companies offering similar 

services are offering “debt relief services” for the purposes of the TSR. The FTC has cited five 

cases supporting its position; Defendants cite none.38 

Moreover, while Defendants claim to merely provide “document preparation,” they in 

fact advertise debt relief services and market far more than mere document preparation.39 

a) Defendants’ Use of Escrow Accounts Runs Afoul of the TSR 

Defendants contend that, even if the TSR does apply to their operation, they comply with 

the statute’s requirements through their use of escrow accounts. As detailed in Plaintiff’s PI 

Motion, Defendants’ use of escrow accounts does not comport with the requirements of the 

TSR.40 In addition, Plaintiff has uncovered evidence indicating that Defendants were dishonest 

35 Martin ¶ 4 (“I feel [the script] was intended to make it so that people were paying less 

attention by the end of the call.”); see Gangnath Ex. 10 at 2 (Verification agent is supposed to 

“maintain[] an even tone throughout recording” with “[n]ot too much or too little enthusiasm.”). 

36 PI Mot. at 13 n.78. 

37 Opp. at 20; Cretcher ¶ 10 (“I remember Brandon explaining how he found a loophole where he 

could only charge a fee if he called it something other than a fee for loan consolidation.”). 

38 PI Mot. at 18-19. 

39 Defendants’ mailers advertise “student loan payment reduction and forgiveness.” Cutter Ex. 

1; Ortiz II, Att. D. Defendants have even included a specific dollar amount listing the savings 

the consumer could expect. Rhode Att. D at 9-10. Consumers contact Defendants looking for 

“student loan forgiveness.” Vorhis Ex. 28 at 2:3-4. Defendants market more than document 

preparation. Cutter Ex. 3 at 4 (will turn off auto-draft for consumers’ loan payments), 10 

(“directly work with” the Department of Education (“ED”) on consumer’s behalf), Ex. 4 at 2 

(“advocate” for consumer with ED), Ex. 5 at 23 (consumers sign a Limited Power of Attorney). 

40 PI Mot. at 9-10, 18-20. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 13 of 20 

in retrieving funds from consumers’ escrow accounts. A former employee stated that in 2017 

Defendant Frere asked her to participate in a “GCS Project,” which aimed to enable Defendants 

to withdraw $500,000 from consumers’ Global Client Solutions escrow accounts.41 Defendant 

Frere instructed her and others to persuade 1,200 of Defendants’ clients to sign a form stating 

that Ameritech had completed the promised work on their student loans, even if Defendants had 

performed no work on the consumer’s file. She estimated that for 75% of these consumers, 

Ameritech had not completed work on the consumer’s file. 

B. The Equities Weigh in Favor of a Preliminary Injunction 

The equities in this case weigh heavily in favor of preliminary injunctive relief. 

Defendants argue that the requested relief should be denied because of the possible impact on 

consumers.

42 The FTC has no interest in leaving consumers, who have already been deceived by 

Defendants, without assistance. If Defendants’ business can operate lawfully, a neutral receiver 

will not halt its activity.43 However, if a receiver determines that Defendants’ activities are 

unlawful, the Court should not let them continue. CFTC v. British Am. Commodity Options 

Corp., 560 F.2d 135, 143 (2d Cir. 1977) (“A court of equity is under no duty ‘to protect 

illegitimate profits or advance business which is conducted [illegally].’”) (quoting FTC v. 

Thomsen-King & Co., 109 F.2d 516, 519 (7th Cir. 1940)). In that case, there would be numerous 

options to mitigate any potential disruption to consumers.44 

In any event, the extent to which Defendants are actually helping their clients is 

questionable. Defendants boast that Ameritech and AFBC have “helped” 39,068 borrowers, yet, 

only 19,048 clients have been enrolled in an IDR program.45 It is unclear how Defendants 

“helped” the remaining 20,020 borrowers. And out of AFBC and Ameritech’s 23,082 current 

41 The incident is discussed in the declaration of Danielle Kinney at paragraphs 5-8. Defendants 

terminated Ms. Kinney when she refused to cooperate with this project. Id. at ¶ 13.

42 Opp. at 21-22.

43 See infra, Section III.C.

44 The FTC’s proposed receiver has extensive experience with student loan debt relief 

companies. Notice of Proposed Receiver, Atts. A-B (Dkt. 23-1, 23-2). The Court could 

expressly instruct the receiver to contact current clients, suggest that they may need to contact 

their loan servicers directly, and provide them with information on how to do so. 

45 Knickerbocker ¶ 9 

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clients,46 over 41% have loans currently in forbearance.

47 Defendants have not explained 

why such a high percentage of their clients’ loans are in forbearance, or provided details about 

how long their clients’ loans are generally left in forbearance. Some consumers are already in an 

IDR program when they call Defendants, and Defendants still enroll them in the “program.”48 

C. The Requested Relief Is Appropriate 

Defendants overstate the relief requested by Plaintiff. Plaintiff’s Proposed PI Order 

requires that Defendants refrain from misrepresenting their services to consumers, comply with 

the TSR, preserve records, and disclose new business activity. Defendants have stated that they 

are already preserving their records. Disclosing new business activity should not cause undue 

burden. Compliance with the law is not an unreasonable encumbrance. 

Plaintiff also asks the Court to appoint a neutral receiver as the Court’s agent to assume 

control of Corporate Defendants, secure their assets, and assess and report on “whether the 

business[es] can be operated lawfully and profitably.”49 During the receiver’s assessment, and 

afterwards if he determines that the businesses can be operated legally, the Corporate Defendants 

may continue to operate, including working on consumer files and paying employees. 

It is crucial to the receiver’s work that he be able to take control of Corporate 

Defendants’ assets. This is not a “freeze.” The receiver would have the ability to continue 

company operations. The receiver would also ensure that Corporate Defendants’ funds, which 

may be needed to provide consumer redress, are not dissipated in the course of litigation. 

46 Defendants indicate that there are 15,707 active clients enrolled in an IDR program, and an 

additional 7,375 active clients in forbearance during program enrollment. Knickerbocker ¶¶ 9, 

14(a). Defendants’ Opposition states that they have 25,141 active clients, but it does not appear 

that this is supported by the underlying declaration. Opp. at 5.

47 It appears that 9,564 of Defendants’ current clients are in forbearance. Defendants indicate 

that Ameritech and AFBC had 7,375 active clients in forbearance during the process of program 

enrollment. Knickerbocker ¶ 14(a). It appears that an additional 2,189 active clients are in 

forbearance during recertification for an IDR program (Defendants state that there are 15,707 

active clients successfully enrolled in an IDR plan, but only 13,518 active clients who are 

actively enrolled in an IDR plan; the FTC deduces that the remaining 2,189 clients were at one 

time enrolled in an IDR program but are in forbearance pending recertification). Id. ¶ 9.

48 Vorhis Ex. 14 at 10:24-11:3, 19:20-21 (consumer is already enrolled in an IDR program, yet 

the sales agent says that she “would benefit from--by being in the program,” and enrolls her). 

49 Notice of Proposed Receiver Att. A at 3 (Dkt. 23-1); Proposed PI Order at 10-11 (Dkt. 22-1). 

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Plaintiff has shown that Defendant Frere has already spent large amounts of company assets for 

personal purposes, funneled money to family members and family businesses, and transferred 

millions of dollars into foreign accounts.50 While Defendants complain that this information is 

“stale,” they neither provide updated information nor explain how expenses such as over $19,000 

to a cruise line or over $73,000 on custom wine tanks from a company owned by family 

members are related to their business.51 There is also reason to believe that Frere transferred 

over $3.164 million from Corporate Defendants’ accounts to his personal account; Defendants 

do not rebut this.52 Provided the allegations against Defendants, there are sufficient indications 

of dissipation of assets for the Court to appoint a receiver with authority over Defendants’ assets. 

D. Defendants’ Timeliness Argument Is Without Merit 

Defendants argue, without legal support, that the Court should not order an injunction 

because such a request is “untimely.” Aside from the legal deficiencies of this assertion, the 

facts show that the FTC has conducted a diligent investigation. Defendants acknowledge that the 

FTC has been in “constant dialogue with the Companies for the last eight months.”53 Plaintiff 

provided Defendants opportunities to explain their practices to staff, the then-Acting Director of 

the Bureau of Consumer Protection, and the FTC Commissioners.54 In an effort to immediately 

curb consumer harm and preserve judicial resources, Plaintiff offered to enter into a Stipulated 

Preliminary Injunction.55 Defendants waited until the last hour to reject this compromise.56 

50 PI Mot. at 23 nn.114-116, 24 nn.117 & 118, 25 n.120.

51 George Att. H at 8 (two charges totaling $19,673 to “PG Cruise Line – Dublin”); George ¶ 14, 

Att. G (showing payments of $73,408 to Sonoma Stainless); Ortiz ¶ 15, Att. J (Andre Frere and 

Gloria Frere are officers); http://sonomastainless.com/. 

52 PI Mot. at 23 n.114. 

53 Opp. at 24. Defendants also complain that a letter their counsel sent to the FTC went 

unanswered. The FTC received over 2.68 million pieces of correspondence last year and cannot 

write unique responses to each inquiry. Clark ¶ 3. The FTC has received numerous letters from 

Defendants’ counsel, and he has received form responses from the FTC in the past. Id. ¶¶ 4-5.

54 Defendants met with then-Acting Director of the Bureau of Consumer Protection, Thomas 

Pahl, on October 19, 2017. Amended Complaint ¶ 30, AFBC v. FTC, No. 17-cv-04817 (N.D. 

Cal. Nov. 2, 2017) (Dkt 19). Defendants met with Acting Chairman Maureen Ohlhausen and 

Commissioner Terrell McSweeny on January 17, 2018. Ortiz II Att. K at 1. 

55 Ortiz II Att. L at 1-2, 64.

56 Ortiz II Att. M. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 16 of 20 

Defendants took every opportunity to delay the FTC’s impending enforcement action and cannot 

now claim that those few extra months have rendered the FTC’s evidence outdated. 

IV. DEFENDANTS OMIT AND OBSCURE KEY INFORMATION 

In their Opposition, Defendants omit and obscure information that is key to a full 

understanding of their practices. In this section, Plaintiff highlights some of the crucial gaps. 

A. Defendants Ignore Their Misrepresentations Regarding Family Size 

Defendants largely ignore the voluminous evidence showing that their representatives 

mislead consumers regarding who may be included in the family size reported to the government 

on IDR applications. This is not a surprise, as the evidence lays out Defendants’ concerted and 

egregious effort to manipulate consumers to overstate their family size.57 Defendants train their 

sales agents to give consumers inaccurate information.58 Defendants do not claim to have 

changed this practice.59 The evidence shows that even when sales representatives rattle off the 

scripted family size definition, the representatives then go on to use misleading examples and 

inaccurate statements to persuade consumers that it is appropriate to inflate their family size.60 

When a consumer wavers, the sales representatives call in supervisors to finish the job.61 

The data corroborates this point: Defendants’ clients’ applications provide family sizes 

significantly higher than those provided by the general pool of borrowers who apply for IDR 

programs. According to Defendants, the average family size for consumers enrolled in AFBC 

and Ameritech programs over the last four years was: 6.03 (2015); 6.57 (2016); 5.05 (2017); and 

4.3 (2018).62 In stark contrast, the average family size for all borrowers repaying loans under 

ICR or IBR programs ranged between 2.11 and 2.47 as of November 11, 2016.63 

57 Belnap ¶ 7; Cretcher ¶ 7; Kinney ¶ 9; Ortiz II Atts. F at 11:2-12:5, H at 8:10-11:16, J at 7:23-

8:9 (training exercise); Stalick ¶¶ 6-8; Zaorski ¶ 6; Carbonneau ¶ 4; Hamilton ¶¶ 10-11, Att. A at 

6; Martinez ¶¶ 8-9; Ortiz Atts. JJ at 12:15-13:1, LL at 11:9-14:10, 19:1-20:20, 25:2-6, XX at 

9:13-10:23, 12:18 -13:21; Stiner Atts. L at L-18:4-19:5, DD at 18:12-20; Vildasol ¶ 5. 

58 See supra, 3 n.13.

59 Defendants make only two passing references to “family size.” Opp. at 7.

60 See supra, 12 n.57; Gangnath Ex. 1.

61 Stalick ¶¶ 5, 8.

62 Knickerbocker ¶ 11. Conspicuously absent are these figures for years prior to 2015. 

63 Foss at 8, ¶ 51(f). 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 17 of 20 

B. Defendants Advertise Primarily Through Deceptive Mailers 

Defendants claim they no longer contact potential clients via mailers.64 This is 

surprising, given that consumer complaints as recent as January 2018 indicate that Defendants 

were scraping consumers’ Facebook accounts to find pictures to use on personalized mailers.65 

Defendants do not mention how they currently contact prospective clients.66 Defendants 

do not provide any evidence indicating that their current methods of contacting consumers are 

less deceptive than their previous mailers, or that they now advertise that Defendants also sell a 

“financial education” program. Defendants merely assert that they have changed their practices, 

and hope that the Court accepts this excuse.67 

C. Defendants’ Use of Scripts and Compliance Processes Are Flawed 

Defendants point to disclosures in their scripts and their claimed compliance processes to 

show that they inform consumers about their services and fees. Defendants’ scripts are largely 

irrelevant in light of evidence showing that Defendants encouraged sales representatives to 

obscure details about “the program” after a perfunctory reading of the materials.68 Plaintiffs have 

provided numerous examples where Defendants’ sales agents added commentary outside the 

script to mislead consumers.69 Likewise, compliance audits are only useful if the auditors 

accurately review calls and if Defendants correct any misstatements with deceived consumers. 

Plaintiff has produced evidence of numerous calls with misstatements, and Defendants have not 

claimed that these misrepresentations were caught by compliance auditors. In fact, even the 

64 Opp. at 13.

65 Holmes ¶¶ 2-8 (“I felt scared that a random company had gone through my Facebook account. 

[I]t made me feel like I was being stalked.”), Att. A; Bussewitz ¶¶ 2-3, Att. A (“I was upset that a 

company used my private photo without my permission.”); Ortiz II Att. A at 16-17, 23. 

66 This is important information given that mailers have been Defendants’ primary method of 

contacting consumers. Cutter ¶ 4.

67 Defendants state that they “almost immediately made the one requested change and included 

the company’s name on the mailer.” Opp. at 13. However, in Defendants’ December 29, 2016 

letter to the FTC, the attached mailers did include the company name. Although Defendants sent 

this version to the FTC in December 2016, it appears that mailers with Defendants’ names 

included were not actually sent out for another year. Vorhis Ex. 3 at 15-20; Cutter ¶ 15.

68 See supra, 3 n.13.

69 See supra, 12 n.57. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 18 of 20 

compliance audits that Defendants provided in their Opposition are problematic.70 Further, 

Defendants have provided no evidence that, when they identify a misstatement by their sales 

representatives, they take corrective action to inform the consumer. 

D. Defendants Use Loan Servicers as Scapegoats 

Defendants want to make this a case about loan servicers. However, the focus of this 

case is Defendants’ actions and misrepresentations, not the loan servicers’ practices. Defendants 

add to borrowers’ confusion by deceiving them about their loan payments. And it is Defendants, 

who charge unknowing consumers for a membership unrelated to their loans. 

E. Plaintiffs’ Declarants Provide Valuable and Credible Evidence 

Defendants attempt to dismiss the FTC’s voluminous evidence and numerous 

declarations as “misleading.” While the declarations are credible and persuasive on their face, 

some of the attacks on the FTC’s declarants warrant a brief discussion. 

1. The Better Business Bureau 

In his declaration, Daniel Stiner details the BBB’s in-depth investigation into Defendants’ 

business practices. The only defense that Defendants can mount to this compelling evidence is 

that “the Companies have primarily been based out of the Oakland BBB, and maintained an A 

rating (AFBC and FEBC) and a B+ rating (Ameritech) . . . .” Defendants’ attacks do not 

diminish the hundreds of consumer complaints received by the BBB. Also, Defendants omit that 

they applied for and sought to keep accreditation with the Sacramento BBB.71 Finally, evidence 

shows that Defendants required consumers to withdraw BBB complaints in exchange for 

receiving a refund, which could have kept their rating artificially high.72 

70 Defendants submitted a compliance audit with a “100%” score. Gangnath Ex. 2. Plaintiff 

identified the underlying call, submitted as Ortiz II Atts. G and H. The sales agent successfully 

encourages the consumer to double her family size from 2 to 4, by saying “you can state up to 

14,” giving the consumer “options” for payments based on family sizes, and saying “giving gifts 

and like helping with bills every once in a while” is sufficient. Ortiz Att. H at 8:10-11:16. The 

sales agent references the FEBC program in passing, but does not make clear that the consumer 

is paying a monthly fee for a separate benefits program. Id. at 15:8-14, 16:14-15, 33:1-7.

71 Stiner ¶¶ 28, 35, 49, 51-52, 56.

72 Id. ¶¶ 22-23, Att. G. There is also evidence of false positive reviews submitted to the BBB. 

Ortiz ¶ 5, Att. B. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 19 of 20 

2. Great Lakes 

Defendants offer no evidence negating Mr. Lee’s significant experience in and 

understanding of the student loan industry. Nor do Defendants offer any credible attacks on the 

authenticity of the consumer complaints attached to Mr. Lee’s declaration.73 

3. Consumer and Former Employee Declarants 

The declarations of Defendants’ former employees and consumers tell a consistent story 

– one where Defendants intentionally hide their fees, misrepresent their services, and inflate 

family sizes, among other things.74 Consumer call recordings and complaints submitted to the 

Court also support the declarants’ descriptions of Defendants’ practices. The fact that the 

company terminated some of the employee declarants does not make them less credible.75 

Defendants in fact have an incentive to terminate some employees to make a show of 

compliance, while still reaping the benefits of those terminated employees’ sales. 

Defendants largely rely on the electronically-signed agreements to impugn consumer 

declarants.76 For most of these declarants, Defendants merely point to the signed contract to 

show they were duly informed about Defendants’ services. As explained about, these contract 

disclosures are insufficient to cure Defendants’ misrepresentations.77 

V. CONCLUSION 

The FTC respectfully requests the proposed Preliminary Injunction be issued to protect 

the public from further harm and help ensure effective relief for those already harmed.78 

73 Lee ¶¶ 1, 5, Atts. A-C.

74 Indeed, declarations from additional former employees also paint the same picture. See 

Cretcher Decl., Kinney Decl., Martin Decl., Stalick Decl., Zaorski Decl. 

75 Some former employees acknowledge they were terminated by Defendants. Dowdell Att A. at 

2; Hamilton ¶ 3; Kinney ¶ 13. Further, Defendants provide extremely thin support for statements 

regarding two former employees. See Farey ¶¶ 5-6.

76 Plaintiff withdraws the declaration submitted by Lenora Bowles in this matter. Plaintiff has 

been unable to reach Ms. Bowles and has reason to believe that she is unavailable. 

77 See supra, Section III.A.1.a.(1). 

78 In the event the Court does not enter the Proposed PI Order, the FTC requests that the Court 

consider lesser relief, such as appointing a receiver over FEBC only and requiring a letter to be 

sent to Defendants’ clients advising them of the details of their enrollment. 

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Case 4:18-cv-00806-SBA Document 103 Filed 04/19/18 Page 20 of 20 

Respectfully submitted, 

ALDEN F. ABBOTT 

Acting General Counsel 

Dated: April 19, 2018 /s/ Roberta Tonelli 

Sarah Schroeder 

Roberta Tonelli 

Evan Rose 

Attorneys for Plaintiff 

FEDERAL TRADE COMMISSION 

Reply in Support of Motion for Preliminary Injunction Page 16

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