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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 GRANTING MOTION FOR 

PRELIMINARY INJUNCTION 

Dkt. 22 

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

against Brandon Frere (“Frere”) and American Financial Benefits Center (“AFBC”), 

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

(collectively “the Companies,” and together with Frere “Defendants”). The matter is 

presently before the Court on the FTC’s Motion for Preliminary Injunction. Having read 

and considered the papers filed in connection with this matter, and being fully informed, the 

Court hereby GRANTS 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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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. §§ 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, 

majority owner, and CEO of the Companies. Id. ¶ 9. Defendants have “advertised, 

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

United States.” Id. ¶¶ 6-9. 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 

 The Department of Education (“ED”) offers a limited number of student loan 

forgiveness programs. Compl. ¶ 15. One such program is Public Service Loan Forgiveness 

(“PSLF”), which allows borrowers employed in the public sector to have a portion of their 

loans forgiven after making timely payments for a period of ten years. Id. ¶ 16. Another 

such program is income-driven repayment (“IDR”), which enables borrowers to reduce 

their loan payments based on a percentage of their discretionary monthly income. Id. ¶ 17. 

After making timely payments for a period of 20 or 25 years under an IDR program, 

borrowers may have a portion of their loans forgiven. Id. Borrowers can apply for PSLF, 

IDR, and other such programs through the ED or their student loan servicers at no cost; the 

programs do not require the assistance of a third-party or the payment of application fees. 

Id. ¶ 19. While an application for an alternative repayment plan is pending, borrowers can 

request a forbearance, which allows them to stop making student loan payments. Id. ¶ 20. 

During a forbearance, interest continues to accrue and be capitalized. Id. 

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C. DEFENDANTS’ BUSINESS PRACTICES

Since 2014 and continuing thereafter, Defendants have operated an alleged student 

loan debt relief enterprise. Compl. ¶12. They advertise student loan payment reduction 

and forgiveness, and purport to provide both a document preparation service and a 

“financial education” membership program. Defendants collect advance fees of $600 to 

$800, purportedly to prepare and submit documents to enroll consumers in PSLF, IDR, and 

other alternative repayment plans.2

 They also collect enrollment fees of $100 to $1,200 and 

monthly fees of $49 to $99 for the financial education membership, which includes access 

to various services that are completely unrelated to student loans, such as “Key Ring & 

Luggage Protection” and “Auto Buying Service and Maintenance Discounts.” Defendants 

have collected over $28 million from consumers through these fees. Id. ¶ 13. As discussed 

below, Defendants engage in deceptive and abusive acts and practices in connection with 

the advertising and furnishing of these services.3

 

1. Fixed Payments and Loan Forgiveness 

As stated above, the ED offers IDR plans that allow eligible borrowers to limit their 

monthly loan payments to a percentage of their discretionary monthly income. IDR and 

PSLF plans may also enable borrowers to have portions of their loans forgiven. Only the 

ED can determine a borrowers’ eligibility for these plans. Income and family size 

determine both borrowers’ eligibility and the amount of their monthly payments, and these 

variables must be recertified annually. Because income and family size likely fluctuate 

over the life of the loan, monthly payment amounts can vary considerably from year to 

year. It is therefore not possible to promise fixed monthly payments for the life of the loan. 

 2 Throughout this Order, the Court refers to Defendants’ customers or potential 

customers as consumers. Defendants market their services to individuals with outstanding 

student loans, whom the Court refers to as borrowers. 

3 The record on the instant motion is voluminous. For brevity, the Court cites only 

select exhibits for representative examples of Defendants’ business acts and practices. The 

Court notes, however, that it has reviewed many of the exhibits in their entirety, not just 

those portions cited by the parties. Based on its review, the Court finds that there is ample 

evidence to support the finding that Defendants engage in the deceptive and abusive acts 

and practices described below. 

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Additionally, obtaining loan forgiveness requires a minimum of 10, 20, or 25 years of 

qualifying payments, depending on the plan in which a borrower is enrolled. Because 

payment amounts may increase over time, the loan may be paid off before any amount can 

be forgiven. It is therefore not possible to promise loan forgiveness in any amount, let 

alone a specific amount. Despite the foregoing, Defendants promise consumers fixed 

monthly payments and loan forgiveness under their program. 

Defendants disseminate direct mail solicitations advertising “student loan payment 

reduction and forgiveness.” Ortiz Decl., Att. S, Dkt. 66; Rhode Decl., Att. D, Dkt. 67. The 

mailers represent that the addressee is “eligible” or “pre-qualified” for the programs. Id. In 

some instances, the mailers advertise payments and savings in specific dollar amounts. Id. 

The mailers create a sense of urgency by stating that the offers are available only for a 

limited time. Stiner Decl., Ex. QQ, Dkt. 70. The mailers do not identify Defendants by 

name; rather, they purport to be from the “Student Loan Department.” Id. Notably, the 

mailers do not advertise any financial education membership program. Id. Finally, the 

mailers include a toll-free number for consumers to call for more information. 

During the subsequent sales calls, Defendants continue to misrepresent the costs and 

features of the federal repayment plans. Sales agents represent that callers have been 

qualified for the promised repayment plan. Stahl Decl., Att. G at 9:2-6, Dkt. 69; Stiner 

Decl., Att. BB at 47:11-13. Agents further represent that, under “the program,” consumers 

will make lower monthly payments for a fixed period, after which the remaining balance of 

their loans will be forgiven. Stiner Decl., Att. BB at 22:2-24:13. Agents represent that 

consumers will save a specific amount of money. Id. 

For example, agents instruct callers to make a chart, on which they are told to record 

various sums. Stiner Decl., Att. BB at 22:2-24:13. Callers are instructed to write “current” 

on one side of the chart and “program” on the other. Id. at 22:13-16. Under “current,” the 

callers are told to record the payment amount of their current repayment plan and the 

purported total cost over the life of the loan. Id. at 22:18-23:1. Under “program,” callers 

are told to record their new payment amount under “the program” and—assuming that sum 

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will remain fixed for the entire repayment period—the total cost of “the program.” Id. at 

23:3-24:4.4 Agents advise that, after callers make a set number of payments, the remaining 

balance of their loans will “be forgiven.” Id. at 24:6-8. Agents instruct callers to record a 

final sum, representing the “total saved.” Id. at 24:6-10. Agents advise that “the goal is not 

to pay off your federal student loan,” but rather, to pay as little as possible to obtain the 

maximum discharge. Gonzalez Decl., Att. B at 56:11-14, Dkt. 59. 

During sales calls, Defendants also obfuscate their fee structure, conflating their fees 

and borrowers’ loan payments by referring to these amounts collectively as the consumers’ 

payments under “the program.” Ortiz Decl., Att. ZZ at 10:25-11:19; see also id. at 12:4-9 

(“These are all federal programs, and payments need to be made on time.”). The quoted 

monthly, yearly, and total costs of “the program” include, not only the borrowers’ loan 

payments, but also fees paid to Defendants. While fees will be discussed in greater detail 

below, the Court preliminarily notes that Defendants’ representations regarding the cost of 

“the program” are misleading in several respects. 

First, payments under “the program” are juxtaposed with consumers’ “current” 

payments, which include only their student loan payments. Thus, agents are not comparing 

apples with apples (i.e., payments under the current repayment plan and payments under the 

alternative repayment plan). Second, payments under “the program” include a monthly fee 

for the “financial education” membership, a service that is unrelated and in no way a 

prerequisite to a borrower’s participation in an alternative repayment plan. It is telling that 

Defendants never present consumers with the (presumably much greater) savings that could 

be achieved under an alternative repayment plan alone, without the membership program. 

 4 The agent states: “And then through the program, the first 11 months your payment 

will be slightly higher. It’s basically the period of time where the majority of the fees are 

covered for all the work that’s done. So for the first 11 months, your payment will be [$]207. . . . And then on the 12th month, your payment will drop down to $126.81. So if 

you want to write . . . $126.81. . . . And then times 12 gives you . . . a new annual outflow of about [$]1,521. . . . And then again, like I said before, you’d only have to pay into the 

program for ten years for 120 payments. So 120 payments of [$]126 comes out to [$]15,217. So write down [$]15,217. . . . That’s total program costs. That’s the money that 

you’re going to put into the program.”

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2. Program Eligibility and Family Size 

Defendants also misrepresent consumers’ eligibility for alternative repayment plans 

and the low monthly payments that are quoted. As stated above, factors such as income 

and family size determine whether a borrower qualifies for a repayment plan and the 

monthly loan payment amount. Regulations limit those included in “family size” to the 

borrower, the borrower’s spouse, children who receive more than half their support from 

the borrower, and other persons who both live with and receive more than half their support 

from the borrower. 34 C.F.R. § 682.215(a)(3). 

Defendants’ agents enroll the maximum number of consumers by “aggressively 

inflating family size figures.” Hamilton Decl. ¶ 10, Dkt. 60; see also Martinez Decl. ¶ 8, 

Dkt. 64 (“It was common practice to exaggerate family size figures in order to get people to 

qualify.”). During sales calls, agents counsel consumers to report higher family sizes by 

misrepresenting the level of support required to include someone as a family member. 

For example, one sales representative told a caller: 

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. 

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

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

Stiner Decl., Att. DD at 20:6-14. The caller reported that he was “still at home” and asked 

whether his “mom, dad, and . . . brother” should be included in his family size. Id. at 

20:19-21. The agent responded, “Absolutely.” Id. at 20:22. After adding the borrower and 

his fiancée—to achieve an already inflated family size of five—the agent further inquired: 

[I]s there any other maybe friends that come . . . stay with you that you . . . 

feed them, you clothe them . . . go hang out . . . go to see a movie, you pay for 

them . . . you drive them around, gas, you know, take them to work? Is there 

. . . anybody that you bought Christmas presents for, maybe a niece, nephew, 

somebody that you would be able to add in, somebody in your family? 

Id. at 21:4-13. 

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 When prospective customers express skepticism, Defendants make additional false 

or unsubstantiated representations to reassure them. Agents emphasize that family size is 

quite broad and more inclusive than “dependents.” Id. at 18:7-14; Ortiz Decl., Att. LL at 

10:13-18 (stating that the definition of family size is “rather broad” and explaining that, 

even though the agent is “a dad with a daughter,” when he includes all the people he 

supports “under this definition,” his family size is “probably . . . closer to eight”). Agents 

advise that family size is “pretty much just an arbitrary number that you as a client 

determine and provide me.” Stiner Decl., Att. DD at 18:17-18; see also id. at 19:6-8 (“So, 

pretty much, it’s just a number that’s determined by you, just something that I got to put to 

keep the process moving.”). Agents further advise that consumers will not be asked to 

verify or prove a family size of less than ten. Ortiz Decl., Att. LL at 13:12-20. 

 Consumers trust Defendants’ purported expertise in determining family size. 

Vildasol Decl. ¶ 5, Dkt. 71 (“[The agent” informed me that this was a new program and 

that he was an expert. I trusted him.”). Consumers may enroll in Defendants’ program 

only to later learn that they do not qualify for an alternative repayment plan or the quoted 

monthly payments. Id. ¶ 10 (consumer was enrolled in Defendants’ program from June 

2014 to September 2015 before his lender advised that he did not qualify for PSLF and 

claimed that he had unlawfully inflated his family size to qualify for a forbearance). In 

other cases, consumers may continue to be enrolled in a repayment plan for which they do 

not actually qualify. This can significantly set back consumers’ repayment of their student 

loans and potentially expose them to additional liability. Id. ¶¶ 2, 14 (consumer paid 

Defendants $2,491 in fees while his student loans were kept in forbearance for 15 months; 

his loan balance increased from approximately $70,000 to $75,000 due to accrued interest). 

3. Defendants’ Fees 

Defendants collect various fees from consumers. Defendants charge between $600 

to $800 for document preparation services and anywhere from $100 to $1,200 to enroll 

consumers in the financial education membership program. Archibald Decl., Att. B, Dkt. 

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50; Vildasol Decl., Att. A. Defendants also charge a continuing monthly fee, usually 

between $49 and $99, for the financial education membership program. Id. 

a. Advance Fees in Violation of the TSR 

The TSR generally prohibits sellers and telemarketers of any debt relief service from 

charging advance fees. 16 C.F.R. § 310.4(a)(5). A debt relief service provider cannot 

collect fees before it has successfully reduced or otherwise altered the terms of the 

consumer’s debt and the consumer has made at least one payment on the reduced or altered 

debt. Id. If various safeguards are employed, a debt relief service provider may hold 

advance fees in an escrow account. Id. The use and terms of the escrow account must be 

disclosed to consumers in a clear and conspicuous manner. Id. § 310.3(a)(1)(vii)(D). 

Defendants collect payment information from consumers during the initial sales 

calls. Stiner Decl., Att. CC at 17:17-18:12. Consumers pay all or a portion of the 

document preparation fee and financial education membership program enrollment fee 

almost immediately, and often long before they are enrolled in a new loan repayment plan. 

Archibald Decl. ¶¶ 7, 9-11, 13 (consumer enrolled 1/8/16; first payment deducted 2/5/16; 

forbearance notice received 6/9/17; IDR adjustment received 7/4/17); Vildasol Decl. ¶¶ 4, 

8, 10 (consumer enrolled 4/3/14; first payment deducted 5/30/14; consumer learned his loan 

was in forbearance and he did not qualify for PSLF in September 2015). 

 Prior to 2015, AFBC collected advance fees directly from consumers. In late 2015, 

Defendants formed Ameritech and FEBC and partitioned their document preparation and 

financial education membership services. Ortiz Decl., Att. EEE at 3. Since that time, 

Ameritech has held advance fees for its services in escrow accounts. Defendants claim not 

to deduct funds from the escrow accounts until fees have been “earned” under the TSR. 

Id., Att. DDD at 8, 11. However, Defendants provide conflicting statements as to when 

exactly that occurs and acknowledge that fees may be deducted before consumers are 

enrolled in an alternative repayment program and/or before they make their first payment 

thereunder. Id., Att. CCC ¶ 21 (Ameritech accepts payment “after the customers receive 

their results”); id., Att. DDD at 15 (Ameritech does not accept payment until customers are 

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accepted into an alternative repayment plan and make a payment thereunder, “[e]xcept in 

cases of forbearances” ); id., Att. FFF at 3 (Ameritech accepts payment “after the company 

completes and submits the consumer’s documents”). Defendants have also failed to clearly 

and conspicuously disclose the use and terms of the escrow accounts. 

b. Deceptive Monthly Fees 

As discussed briefly above, Defendants also charge a continuing monthly fee for the 

“financial education” membership program. This fee is encompassed within the program 

costs quoted to consumers. Defendants represent that this fee is tied to consumers’ 

enrollment in an alternative repayment plan and that some or all of the monthly payments 

under “the program” are applied to consumers’ outstanding loan balance. Archibald Decl. 

¶¶ 4, 13, 15; Vildasol Decl. ¶¶ 7, 11; Stiner Decl., Att. BB at 22:2-24:10 (describing costs 

under “the program”). For example, when a consumer asked, “On top of my other loans, I 

have to pay now you guys,” the sales agent responded: “So it’s a . . . part of the program. 

It’s a part of . . . that monthly amount that I had . . . told you. So with the program, part of it 

is being paid toward . . . the enrollment fee, and then once it drops, it goes straight to your 

loan servicer, and it partners with that.” Ortiz Decl., Att. BBB at 51:4-13. This is false. 

 When pressed, Defendants admit that their monthly fee pays for a financial 

education membership program; however, they generally obscure this fact. Defendants do 

not advertise the financial education membership program on their mailers and infrequently 

mention it during sales calls. When the membership is mentioned on sales calls, agents 

describe it as a complimentary service. Stiner Decl., Att. CC at 36:12-37:17 (describing the 

membership as “a free account”). Curiously, monthly payments for the financial education 

membership program continue for the term of consumers’ student loans, falsely making it 

appear that the fees are related to their continued enrollment in an alternative repayment 

plan. Stiner Decl., Att. BB at 22:2-24:10. In furtherance of this misperception, Defendants 

represent that canceling enrollment in “the program” will also terminate a borrower’s 

enrollment in an alternative repayment plan and return him/her to a standard repayment 

plan. Id., Att. CC at 26:7-12; Ortiz Decl., Att. BBB at 53:16-21. Finally, if consumers 

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miss a payment for the financial education membership program, Defendants send 

correspondence suggesting that the consumer is at risk of falling behind on his/her student 

loan payments. Sills Decl., Att. D, Dkt. 68 (including “RE: Student Loan Payment” and 

urging swift action to “get your file back on track”). 

Approximately ninety percent of consumers who enroll with Ameritech also enroll 

in FEBC’s “financial education” membership program. Ortiz Decl., Att. GGG at 2. 

Former customers aver that they would not have knowingly enrolled in or paid for such a 

program, however. Archibald Decl. ¶¶ 14-16; Sills Decl. ¶ 8. This is unsurprising, given 

that consumers contact Defendants for the express purpose of reducing monthly expenses. 

4. Other Practices 

Defendants engage in other practices that facilitate the deceptive and abusive 

practices described above. In brief, after convincing a consumer to enroll in “the program,” 

sales agents email lengthy and confusing contracts that the consumer is required to sign 

electronically during the sales call. Archibald Decl. ¶ 5; Vildasol Decl. ¶ 6. Sales agents 

reassure consumers by stating that the contracts merely reiterate information that has been 

provided throughout the call. Stiner Decl., Att. BB at 53:17-60:8. After the consumer has 

signed the contracts, he/she is transferred to the “Verification Department.” Ortiz Decl., 

Att. DDD at 7. Another representative then quickly reads through a script providing 

important legal qualifications and clarifications that often conflict with sales agents’ earlier 

representations. Stiner Decl., Att. BB at 63:22-83:18; id., Att. CC at 43:8-70:78. 

Defendants interfere with communications between borrowers and their loan 

servicers, making it more difficult for consumers to discover Defendants’ deceptive 

practices. Defendants require consumers to provide highly sensitive information, including 

Social Security numbers and Federal Student Aid (“FSA”) login IDs, passwords, and 

security questions. Archibald Decl. ¶¶ 8, 12. In some cases, Defendants change borrowers’ 

FSA passwords and contact email addresses, causing loan-related correspondence to be sent 

directly to Defendants and locking consumers out of their own student loan accounts. Lee 

Decl. ¶ 13, Dkt. 62 (AFBC.Confirmation@afcenter.com input as contact email address for 

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199 borrowers with one loan servicer). Additionally, Defendants routinely place 

borrowers’ loans in forbearance, sometimes for lengthy periods, during which time 

borrowers are not required to make loan payments and loan servicers are prohibited from 

contacting borrowers. Id. ¶ 11. Thus, consumers may be unaware that their loans are in 

forbearance, continuing in the belief that their monthly payments to Defendants are being 

applied to their student loans. Archibald Decl. ¶ 13; Vildasol Decl. ¶¶ 10, 14. 

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. 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. 

The FTC filed the instant motion for preliminary injunction, Dkt. 22, after which 

Defendants filed a motion to dismiss, 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, 2018. 

Dkt. 122.5

 Upon the parties’ request, the Court referred the action for an early settlement 

conference before Magistrate Judge Laurel Beeler. Dkt. 126. The Court then took the 

pending motions under submission. Dkt. 138. The parties participated in a settlement 

conference on July 2, 2018, and further settlement discussions thereafter; nevertheless, the 

action did not settle. Dkt. 149, 151. On August 8, 2018, the Court issued an Order 

Denying Defendants’ Motion to Dismiss. Dkt. 157 (“Order on MTD”). 

In support of the instant Motion for Preliminary Injunction, Dkt. 22 (“Mot.”), the 

FTC filed 22 declarations along with attached exhibits, which total over 2,400 pages. 

 5

 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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Dkt. 50-71. Defendants filed an Opposition to the FTC’s motion, Dkt. 79 (“Opp’n”), along 

with over 1,400 pages of supporting declarations and exhibits, Dkt. 79-1 through 79-105. 

Thereafter, the FTC filed a Reply in support of the motion, Dkt. 103 (“Reply”), along with 

nearly 500 pages of additional supporting declarations and exhibits, Dkt. 104-115. 

After the close of briefing, Defendants filed an Administrative Motion to Consider 

Additional Evidence in Ruling on FTC’s Motion for Preliminary Injunction, or, in the 

Alternative, to Hold Evidentiary Hearing. Dkt. 140. The FTC opposes the administrative 

motion. Dkt. 142. Defendants also filed a Motion for Leave to File Reply to FTC’s 

Opposition to Defendants’ Administrative Motion, Dkt. 146, along with the proposed reply 

brief, Dkt. 146-1. The FTC opposes that motion a well. Dkt. 147. 

II. LEGAL STANDARD 

 The FTC may file suit in a district court whenever it has reason to believe (1) that 

any person, partnership, or corporation is violating, or is about to violate, any provision of 

law enforced by the FTC, and (2) that the enjoining thereof would be in the interest of the 

public. 15 U.S.C. § 53(b). Pursuant to Section 13(b) of the FTC Act, a district court may 

issue a preliminary injunction “[u]pon a proper showing that, weighing the equities and 

considering the Commission’s likelihood of ultimate success, such action would be in the 

public interest.” Id. “Section 13(b), therefore, ‘places a lighter burden on the Commission 

than that imposed on private litigants by the traditional equity standard; the Commission 

need not show irreparable harm to obtain a preliminary injunction.’” FTC v. Affordable 

Media, 179 F.3d 1228, 1233 (9th Cir. 1999) (quoting FTC v. Warner Commc’ns, Inc., 742 

F.2d 1156, 1159 (9th Cir. 1984)); see also FTC v. World Wide Factors, Ltd., 882 F.3d 344, 

346 (9th Cir. 1989) (“harm to the public interest is presumed”). In deciding whether to 

issue a preliminary injunction in a statutory enforcement action, a district court need only 

(1) consider the likelihood that the FTC will succeed on the merits; and (2) balance the 

equities. Affordable Media, 179 F.3d at 1233. The district court’s decision will be 

reversed only if the court abused its discretion by basing its decision on an erroneous legal 

standard or on clearly erroneous factual findings. Id. 

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III. DISCUSSION 

The FTC seeks a preliminary injunction, including the appointment of a neutral 

receiver, to halt Defendants’ purportedly deceptive debt relief operation. Such relief, the 

FTC contends, is warranted to prevent further harm to consumers and to locate and secure 

assets and records without disrupting legitimate business activities. Defendants oppose a 

preliminary injunction and object to the scope of the proposed relief. 

A. TIMELINESS OF THE MOTION

As a threshold matter, Defendants assert that the motion for a preliminary injunction 

is untimely because the FTC spent months investigating the Companies and defending 

against the related declaratory relief action. According to Defendants, such delay 

demonstrates that there is no urgency necessitating injunctive relief. Defendants’ assertion 

is legally unsupported and the premise underlying the assertion is unfounded. The record 

shows that the FTC has conducted a diligent investigation. See Reply at 11. Such 

investigative efforts are time-consuming and essential to establish an adequate factual basis 

to initiate an action. Indeed, the FTC must balance the need to protect consumers from 

further harm with the need to develop an evidentiary basis for its claims. Further, in a 

consumer protection action such as this, the purported harm is ongoing. Thus any alleged 

delay in moving for a preliminary injunction does not necessarily eliminate the opportunity 

for—or the necessity of—injunctive relief designed to curb consumer harm. 

B. LIKELIHOOD OF SUCCESS ON THE MERITS 

1. The FTC Act 

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

affecting commerce.” 15 U.S.C. § 45(a)(1). To prove a violation of Section 5, the FTC 

must show: (1) “a representation, omission, or practice that,” (2) “is likely to mislead 

consumers acting reasonably under the circumstances,” and (3) “is material.” 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,” rather than isolated words and phrases. Id. (quoting FTC v. 

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Cyberspace.Com LLC, 453 F.3d 1196, 1200 (9th Cir. 2006) (“A solicitation may be likely 

to mislead by virtue of the net impression it creates even though the solicitation also 

contains truthful disclosures.”)). A misrepresentation “is material if it ‘involves 

information that is important to consumers and, hence, likely to affect their choice of, or 

conduct regarding, a product.’” Cyberspce.Com, 453 F.3d at 1201 (quoting Cliffdale 

Assocs., Inc., 103 F.T.C. 110, 165 (1984)). 

The FTC contends that Defendants make material misrepresentations “about 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 toward consumers’ student loan balances.” 

Mot. at 17. The Court finds that the FTC is likely to prevail on the merits of its claim under 

Section 5 of the FTC Act based on these misrepresentations. 

As set forth in detail above, Defendants represent that consumers are pre-qualified 

for payment reduction and loan forgiveness, despite being unable to guarantee eligibility 

for alternative repayment plans. In attempting to qualify consumers for such programs, 

Defendants also systematically encourage borrowers to inflate their family size, thereby 

enrolling them in programs for which they may not be eligible. Defendants represent that, 

under “the program,” consumers will make lower monthly loan payments for a fixed 

period, after which the remaining balance of their loans will be forgiven. In many 

instances, Defendants advertise or promise payments and savings in specific dollar 

amounts. Given the requirements of alternative repayment plans, however, Defendants 

cannot legitimately promise such results. Finally, Defendants obfuscate their fee structure 

by conflating their fees and the borrowers’ student loan payments. Defendants falsely 

represent that payments under “the program” go toward consumers’ loan balances and/or 

are related to their enrollment in an alternative loan repayment plan. In reality, the sums 

collected by Defendants go toward a wholly unrelated “financial education” membership 

program. Although the quoted “program” costs include the borrowers’ loan payments, 

consumers remain obligated to make those payments directly to their student loan servicers. 

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These representations are material and likely to mislead consumers acting 

reasonably under the circumstances. FTC v. Pantron I Corp., 33 F.3d 1088, 1095-96 (9th 

Cir. 1994) (express claims are presumptively material); FTC v. Stefanchik, No. C 04-1852 

RSM, 2007 WL 1058579, at *5 (W.D. Wash. Apr. 3, 2007), aff’d, 599 F.3d 924 (9th Cir. 

2009) (implied claims are presumptively material if the seller intended to make the claim or 

the claims go to the heart of the solicitation or the characteristics of the product or service). 

Further, as persuasively argued by the FTC, the foregoing misrepresentations are not 

cured by disclosures buried in lengthy written contracts that consumers are rushed to e-sign 

at the end of Defendants’ sales calls (i.e., after callers have agreed to enroll). See Resort 

Car Rental Sys., Inc. v. FTC, 518 F.2d 962, 964 (9th Cir. 1975) (The FTC Act is violated 

“if [a company] induces the first contact through deception,” despite buyers later obtaining 

more information.); FTC v. Gill, 71 F. Supp. 2d 1030, 1044 (C.D. Cal. 1999) (disclaimer in 

contract that “consumers eventually sign” is insufficient where it “is not included in the 

representations”; “each representation must stand on its own merit, even if other 

representations contain accurate, non-deceptive information”), aff’d, 265 F.3d 944 (9th Cir. 

2001); see also FTC v. Johnson, 96 F. Supp. 3d 1110, 1139 (D. Nev. 2015) (fine print 

disclosures offered after consumers started the ordering process did not alter the misleading 

net impression created by the solicitation). As the numerous consumer complaints in this 

case make evident, Defendants’ disclaimers are ineffective. See Cyberspace.com, 453 F.3d 

at 1201 (evidence that representations deceived consumers is “highly probative to show that 

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

Defendants counter that Ameritech’s written and verbal disclosures are “robust” and 

“effectively convey that the company is not affiliated with the government, that the debt 

repayment document preparation services it offers can be performed by the borrower for 

free if they choose, that it is not a loan servicer, and that it does not negotiate with loan 

servicers or the ED.” Opp’n at 18. They further assert that “Ameritech’s scripts and 

agreements likewise make this clear.” Id. Relying on the same, Defendants contend that 

the FTC is not likely to prevail on its claims. This showing is uncompelling. 

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Defendants devote portions of the background section of their brief to describing 

their written and verbal disclosures (as well as other matters, including their purported 

internal control and compliance measures). They do not utilize these factual averments in 

the argument section of their brief, however. Rather, Defendants simply state that they 

provide written and verbal disclosures. Although Defendants acknowledge the FTC’s 

contention that their belated disclosures are inadequate, they do not meaningfully address 

the argument. Opp’n at 19. Nor do they provide authorities to rebut those presented by the 

FTC. Instead, Defendants assert, without elaboration, that “Ameritech’s business practices 

and disclosures are wholly distinguishable from those that other courts have found 

warranted injunctive relief.” Id. 

Defendants’ conclusory assertion is followed by a citation to FTC v. Alliance 

Document Preparation, 296 F. Supp. 3d 1197, 1205 (C.D. Cal. 2016), along with a 

parenthetical explaining that injunctive relief was granted in that case, brought as part of 

the FTC’s crackdown on student loan debt relief providers, where the defendants “made a 

number of patently false disclosures.” Opp’n at 10. A comparison of Alliance Document 

Preparation and the instant case reveals that many of the false statements are markedly 

similar, however. 296 F. Supp. 3d at 1205-08 (granting injunctive relief upon a finding that 

the defendants had falsely claimed to “qualify or approve consumers for federal student 

loan forgiveness or discharge programs” and to “permanently reduce the monthly payment 

or the overall balance of the loan”). Thus, Alliance Document Preparation actually 

supports the granting of injunctive relief in this case. 

 Accordingly, based on the evidence presented, the Court finds that the FTC is likely 

to prevail on its claim under the FTC Act.6

 

 6

 Later in their brief, Defendants argue that the FTC may not obtain injunctive relief 

based solely on evidence of past wrongdoing. Not so. See Affordable Media, 179 F.3d at 

1238 (holding that the FTC need not offer evidence that the defendants were likely to 

repeat wrongful conduct). Rather, to avoid injunctive relief, Defendants bear the burden of 

showing that “subsequent events [have] made it absolutely clear that the allegedly wrongful 

behavior cannot reasonably be expected to recur.” Id. They have not satisfied this burden. 

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2. The TSR 

The TSR prohibits deceptive and 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, 310.4.7

 In relevant part, the TSR prohibits any seller or telemarketer from 

misrepresenting, directly or by implication, “[a]ny material aspect of any debt relief 

service.” Id. § 310.3(a)(2)(x). The TSR also prohibits any seller or telemarketer from 

“requesting or receiving payment” of advance fees for any debt relief service—i.e., fees 

requested or received prior to the seller or telemarketer successfully renegotiating, settling, 

reducing or otherwise altering the terms of at least one debt pursuant to an agreement or 

plan executed by the consumer and the consumer making at least one payment pursuant to 

that agreement or plan. Id. § 310.4(a)(5)(i). 

The FTC contends that Defendants violate the TSR by misrepresenting material 

aspects of their services and requesting or receiving advance fees. Defendants counter that 

the FTC cannot prevail on claims under the TSR because: (1) they do not provide a “debt 

relief service,” rendering the TSR inapplicable; and (2) even if it applies, they comply with 

the advance fee provisions by partitioning their services and utilizing escrow accounts. 

As a threshold matter, the Court notes that the FTC has demonstrated a likelihood of 

success on its claim under Section 5 of the FTC Act, and thus, a preliminary injunction may 

issue regardless of whether the FTC also will prevail on its claims under the TSR. Indeed, 

the deception alleged under the TSR and Section 5 of the FTC Act is identical, see Mot. at 

19; only the allegations regarding advance fees are unique to the FTC’s claims under the 

TSR. In any event, the Court finds that the FTC is likely to prevail on the merits of its 

claims under the TSR, for the reasons stated below.

Defendants argue that the TSR is inapplicable because Ameritech does not provide a 

“debt relief service,” but only “document preparation.” Opp’n at 19. As discussed in 

 7

 Defendants’ acts and practices fall within the purview of the TSR because the 

Companies receive inbound calls from consumers in response to direct mail solicitations. 

16 C.F.R. § 310.6(6)(i).

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greater depth in the Court’s Order Denying Defendants’ Motion to Dismiss, the FTC has 

shown that the Companies provide a “debt relief service,” which the TSR defines broadly 

as “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.” Order on MTD at 17 (quoting 16 C.F.R. § 310.2(o)); id. at 17-19. “Defendants’ 

services fall within that definition, as they purport to alter the terms of payment or other 

terms of consumers’ debt.” Id. at 17. 

Turning to the advance fee provisions, Defendants do not dispute that they request 

and receive advance fees. Rather, Defendants assert that they comply with the TSR by: 

(1) partitioning the services provided by Ameritech and FEBC; and (2) utilizing escrow 

accounts for Ameritech’s fees. The TSR allows sellers and telemarketers “to place funds in 

an account to be used for the debt relief provider’s fees” if various safeguards are 

employed. Id. § 310.4(a)(5)(ii). Among other things, the TSR requires that the consumer 

owns the funds; is paid any accrued interest; may withdraw from the debt relief service at 

any time without penalty; and, upon withdrawal, must receive all funds in the account, less 

any funds earned by the debt relief service under section 310.4(a)(5)(i). Id. § 

310.4(a)(5)(ii). Sellers and telemarketers must disclose this information to consumers 

“truthfully, in a clear and conspicuous manner.” Id. § 310.3(a)(1)(viii)(D). 

In 2015, Defendants partitioned the services provided by Ameritech and FEBC. 

According to Defendants, this allows FEBC to collect fees for its financial education 

membership, which they claim is not a debt relief service. As for Ameritech’s fees, 

Defendants assert that, since 2015, they have utilized and properly disclosed their use of 

escrow accounts. According to Defendants, “Ameritech requires consumers to deposit 

funds into an escrow account and only withdraws those funds when the consumer has been 

enrolled in a loan repayment program, and the individual has made the first payment under 

the new loan program.” Opp’n at 20. In support of this assertion, Defendants cite only a 

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copy of the current Ameritech Agreement executed by consumers. Id.; Cutter Decl. ¶ 11 & 

Ex. 5, Dkt. 79-55 & 79-60. Defendants’ showing is uncompelling. 

As a threshold matter, the consumer agreement alone is insufficient to establish that 

Defendants’ have properly disclosed the use of escrow accounts, let alone that they have 

fully complied with the TSR’s advance fee provisions. As noted above, Defendants rely on 

the “current” Ameritech Agreement. Cutter Decl. ¶ 11. Even assuming that the current 

version of the consumer agreement contains all requisite disclosures, prior versions did not. 

See Order on MTD at 21 n.8 (citing Compl., Ex. G). Moreover, Defendants acknowledge 

that funds are withdrawn from consumers’ escrow accounts before they have been enrolled 

in a federal repayment program and made their first payment thereunder. See Ortiz, Ex. 

FFF at 3-4 (Ameritech collects fees “after the company completes and submits federal 

application documents”). This is impermissible under the TSR.8

Accordingly, based on the evidence presented, the Court find that the FTC is likely 

to prevail on its claims under the TSR. 

C. WEIGHING THE EQUITIES

The Court has concluded above that the FTC is likely to prevail on its claims under 

the FTC Act and TSR. Therefore, the second step in deciding whether to grant a 

preliminary injunction is a balancing of the equities. Although the court weighs both the 

private and public interests, the public interests “receive far greater weight.” Warner 

Commc’ns, 742 F.2d at 1165; accord Affordable Media, 179 F.3d at 1236. “When the 

Commission demonstrates a likelihood of ultimate success, a countershowing of private 

 8

 The FTC also argues that the partitioning of Ameritech and FEBC is a “sham” 

intended to circumvent the TSR by “funneling many of the fees to FEBC.” Mot. at 20. As 

the Court has previously noted, it is an open question whether the shuttering of AFBC in 

favor of separate corporate forms serves to shield Defendants from the strictures of the 

TSR. Order on MTD at 14 n.4. Other courts have rejected such tactics. See CFPB v. 

Morgan Drexen, Inc., 60 F. Supp. 3d 1082, 1085-86, 1093-94 (C.D. Cal. 2014) (denying 

motion to dismiss claim for violation of the TSR where the defendants “disguised” 

advanced fees by utilizing separate contracts for “debt relief” and “bankruptcy” services 

and the bankruptcy services appeared to be a sham). Because the FTC is likely to prevail 

on its claim for violation of the TSR’s advance fee provisions based solely on Ameritech’s 

practices, however, the Court need not delve into FEBC. 

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equities alone does not justify denial of a preliminary injunction.” Warner Commc’ns, 742 

F.2d at 1165. Here, a balancing of the equities militate in favor of a preliminary injunction. 

As discussed above, the FTC is likely to prevail on the merits of its claims regarding 

Defendants’ deceptive and abusive business practices. These practices result in ongoing 

injury to consumers. Consumers are enrolled in a financial education membership program 

for which they are charged monthly fees. Consumers may be unaware that these fees are 

for services entirely unrelated to their enrollment in an alternative repayment plan and are 

not used to pay down their student loans. Furthermore, after consumers are told that they 

are pre-qualified for an alternative repayment plan, their loans are often placed in 

forbearance, possibly for lengthy periods, during which interest continues to accrue. Only 

later do some consumers learn that they are ineligible for the promised plan. Still other 

consumers continue to be enrolled in repayment plans for which they are (perhaps 

unknowingly) ineligible due to Defendants’ practice of inflating borrowers’ family size. 

Finally, consumers enroll in “the program” under the false belief that they will achieve 

permanent payment reduction and loan forgiveness resulting in advertised savings of 

thousands of dollars. Defendants cannot guarantee such results, however, and consumers’ 

loan balances may increase because of Defendants’ practices. 

Mitigation of this harm is in the public interest. FTC v. Southwest Sunsites, Inc., 

665 F.2d 711, 723 (5th Cir. 1982) (Injunctive relief is appropriate where evidence suggests 

“a large-scale systematic scheme tainted by fraudulent and deceptive practices, giving rise 

to a ‘fair inference of a reasonable expectation of continued violations’ absent restraint.”). 

Defendants argue that the FTC “cannot demonstrate that, on the whole, consumers 

were deceived.” Opp’n at 21. In support of this assertion, Defendants note that 19,048 

consumers have been enrolled in an IDR program. For the reasons discussed above, 

however, the mere fact that consumers have been successfully enrolled in a repayment plan 

does not show that they have not been deceived. Defendants further argue that “consumers 

will indisputably be harmed if Ameritech is shutdown, particularly if the closure is abrupt.” 

Id. They assert that consumers may lose months of reduced repayment benefits or 

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potentially their continued eligibility to participate in an alternative repayment program if 

paperwork is not timely and correctly completed. The Court is unpersuaded. Whether and 

to what extent Defendants’ services are of actual benefit to consumers is subject to serious 

question. In any event, Ameritech may continue providing services insofar as its business 

practices are lawful. There is no oppressive hardship in requiring Defendants to comply 

with the law. See World Wide Factors, 882 F.2d at 347. Insofar as Defendants’ business 

practices are unlawful, however, harm will be avoided by bringing them to an end. In that 

case, measures may be employed to minimize disruption to consumers. 

D. ADDITIONAL EVIDENCE

After briefing closed, Defendants filed an administrative motion to consider 

additional evidence, or, in the alternative, to hold an evidentiary hearing. Dkt. 140. They 

assert that the presentation of additional evidence is necessary because “the paper case the 

FTC has presented to support the Motion does not withstand scrutiny.” Id. at 1. According 

to Defendants, evidence obtained through discovery shows that the “story” put forward by 

the FTC is “inaccurate and incomplete.” Id. In a footnote, Defendants also assert that the 

FTC submitted exhibits with its Reply that included “significant new evidence.” Id. at n.1. 

Defendants argue that they must be given “an opportunity to respond to new arguments 

raised for the first time” in the FTC’s Reply. Id. 

As to the substance of the administrative motion, Defendants largely attack evidence 

presented by Kelly C. Ortiz (“Ms. Ortiz”), who provided a declaration in support of the 

FTC’s motion for preliminary injunction. Ms. Ortiz is a “Senior Federal Trade Investigator 

for the [FTC]” and a “custodian of documents and records that the FTC obtains during the 

course of [its] investigations.” Ortiz Decl. ¶¶ 1, 3. Ms. Ortiz “participated in an 

investigation of [Defendants].” Id. ¶ 3. As part of that investigation, Ms. Ortiz collected 

evidence, which she describes in her declaration and attaches as exhibits thereto. Id. ¶ 4. 

For example, Ms. Ortiz catalogs hundreds of consumer complaints against Defendants that 

are maintained in an FTC database. Id. ¶¶ 42-48. Ms. Ortiz also explains that Defendants 

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produced 312,532 customer service call recordings and includes both copies and transcripts 

of eight such calls. Id. ¶¶ 55-71. 

According to Defendants, the FTC “asks this Court to infer that, by [Ms. Ortiz’s] 

declaration, it may draw broad conclusions about Defendants’ practices in general.” Dkt. 

140 at 4. Defendants assert that this inference is unsupported. Id. at 3-4. At her 

deposition, Ms. Ortiz stated that the eight call recordings she reviewed were selected by the 

FTC’s counsel and that she did not know how they were selected. Id. at 4 (citing Healy 

Decl. ¶ 5, Dkt. 140-1). Defendants ask why the FTC “isn’t . . . talking about the other 

312,344 calls for which they have complete recordings[.]” Id. They complain that the FTC 

has not done a statistical analysis and offer a litany of other criticisms, including that Ms. 

Ortiz made no effort to identify favorable or exculpatory evidence. Defendants conclude 

that “Ms. Ortiz did little to no independent investigation or analysis related to Defendants, 

the Motion, or this litigation.” Id.9

The Court finds that Defendants’ administrative motion is without basis. Defendants 

assert that “the FTC filed a reply brief that included over a dozen declarations and 

approximately 1,000 pages of evidence.” Dkt. 146-1 at 2. That may be so. However, 

Defendants’ administrative motion does not respond to that evidence. Nor does it identify 

new evidence to which Defendants previously did not have access. The only “evidence” 

discussed in the administrative motion is Ms. Ortiz’s deposition testimony, which 

Defendants fashion to support a “hodgepodge of grievances” regarding the FTC’s 

 9

 The FTC opposes the administrative motion. Dkt. 142. Among other things, the 

FTC asserts in its opposition that Defendants’ motive is delay and that additional discovery 

strengthens the FTC’s case. Defendants seek leave to file a reply. Dkt. 146. Defendants 

assert that the FTC’s opposition goes “well beyond the bounds” of the administrative 

motion and makes “numerous unfettered aspersions regarding Defendants and their 

practices.” Id. Defendants offer a “brief reply for the sole purpose of addressing certain 

inaccuracies or misleading information in [the FTC’s] opposition.” Dkt. 146-1 at 1. The 

Court finds that a response to ancillary matters raised in the FTC’s opposition to 

Defendants’ administrative motion to consider additional evidence is unnecessary and 

offers nothing of substance that bears on the motion for a preliminary injunction. 

Nevertheless, in the interest of creating a complete record that allows the Court to fully 

address Defendants’ arguments, the Court hereby GRANTS Defendants’ motion for leave 

to file a reply in support of their administrative motion. 

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investigation. Dkt. 142 at 2. These grievances largely echo those raised in Defendants’ 

opposition to the motion for preliminary injunction. Nevertheless, the Court hereby 

GRANTS their motion to consider additional evidence.10 

Turning to the substance of the administrative motion, Defendants mischaracterize 

Ms. Ortiz’s declaration. Ms. Ortiz describes her efforts to collect evidence as a custodian 

of documents and records. She does not purport to have led the FTC’s investigation into 

Defendants. Consequently, Defendants’ assertion that Ms. Ortiz has done “little to no 

independent investigation or analysis related to Defendants, the Motion, or this litigation,” 

even if true, does not point to any fatal defect in the FTC’s investigation. Defendants 

further posit that the FTC’s evidence is not representative of their business practices. 

However, the FTC has put forth a robust record that includes thousands of pages of 

consumer complaints, consumer declarations, former employee declarations, consumer call 

recordings, undercover call recordings, and more. That evidence tells a consistent story—

one in which deceptive and abusive acts and practices pervade. Moreover, Defendants 

have had an opportunity to rebut the FTC’s evidence and possess ample evidence regarding 

their own business practices. For example, Defendants possess the consumer call 

recordings produced to the FTC. If a statistical analysis would have been beneficial, 

Defendants were free to perform and present such an analysis. They did not. 

Accordingly, although the Court grants Defendants’ administrative motion to 

consider additional evidence, as well as their motion for leave to file a reply in support 

thereof, the evidence and arguments put forward do not alter the Court’s conclusion 

regarding the propriety of a preliminary injunction.

E. SCOPE OF INJUNCTIVE RELIEF

A district court has the authority to grant preliminary and permanent injunctive relief 

pursuant to Section 13(b) of the FTC Act and Rule 65 of the Federal Rules of Civil 

Procedure. FTC v. H. N. Singer, Inc., 668 F.2d 1107, 1111 (9th Cir. 1982). In actions 

 10 The Court denies Defendants’ alternative request for an evidentiary hearing, given 

their failure to identify any specific evidence that they wish to present.

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brought under Section 13(b) of the FTC Act, a court may exercise the full breadth of its 

equitable powers to order such ancillary relief as may be necessary to accomplish complete 

justice. Id. at 1111-1113 (affirming preliminary injunction that included an asset freeze as 

necessary to preserve funds for restitution). This includes the appointment of a receiver. 

World Wide Factors, 882 F.2d at 346-48 (affirming preliminary injunction that included 

prohibition of unlawful business practices, freezing of assets, and sua sponte appointment 

of receiver); see, e.g., Alliance Doc. Prep., 296 F. Supp. 3d at 1201-02, 1212 (issuing a 

temporary restraining order and then a preliminary injunction that included an asset freeze 

and appointment of a receiver). 

The FTC requests the issuance of a preliminary injunction that requires Defendants 

to refrain from misrepresenting their services, comply with the advance fee provisions of 

the TSR, preserve records, and report new business activity. The FTC further requests that 

the Court appoint a neutral receiver to assume control of the Companies, secure their assets, 

and assess whether and to what extent their business can be operated lawfully. The FTC 

argues that “[a] neutral receiver will prevent further harm to consumers and locate and 

secure assets and records without disrupting legitimate business activity.” Mot. at 25. 

Regarding the securing of assets, the FTC highlights evidence that Frere has transferred 

millions of dollars from the Companies to himself. Id.11 The FTC posits that, without a 

receiver to secure assets, Defendants may continue to dissipate funds needed to provide 

consumer redress. Id. The FTC further argues that “[a] receiver would . . . help assess the 

extent of the fraud, trace its proceeds, prepare an accounting, and make an independent 

report of Defendants’ activities to the Court.” Id. 

 11 Based upon a review of the Companies’ bank records, the FTC notes that Frere 

transferred over $3.164 million from the Companies’ accounts to his personal account. 

Ortiz Decl. ¶¶ 33-38 & Atts. Z, AA, BB; George Decl. ¶ 26 & Att. P, Dkt. 58. Bank 

records also show the dissipation of over $128,000 to airlines, hotels, resorts, casinos, 

cruise lines, and similar companies; over $202,000 to automotive and motorsports companies; and over $253,000 to companies that provide building, landscaping, and related 

supplies and services. George Decl. ¶¶ 15-17 & Atts. H-J. In addition, Frere directed 

payments of over $864,000 to members of his family and family-owned businesses. Id. ¶¶ 

11-14 & Atts. D-G; Ortiz Decl., Att. J. Finally, in August 2017, Frere transferred over $2.4 

million to a foreign bank account located in Andorra. Ortiz Decl. ¶¶ 35-37, Att. AA. 

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In the event that the Court grants the FTC’s motion for a preliminary injunction, 

Defendants ask that the Court deny the FTC’s request to appoint a receiver.12 Defendants 

again argue that consumers will be injured if Ameritech is unable to continue processing 

applications and recertifications for federal student loan repayment programs. They further 

argue that any concern over the dissipation of assets is baseless. Defendants attempt to 

explain certain of the transactions identified by the FTC, noting, for example, that company 

executives have twice flown to Washington D.C. to meet with FTC personnel. Opp’n at 

24. Defendants assert that, “under the FTC’s theory, the expenses for those flights should 

be questioned.” Id. Defendants also take issue with the FTC “chid[ing] Mr. Frere for 

taking compensation and distributions, and the Companies for making distributions to 

investors.” Id. Defendants argue that, “in the absence of ongoing, demonstrably deceptive 

practices, there is no basis for prohibiting regular compensation and distributions.” Id. 

The Court is persuaded that a receiver is warranted. First and foremost, the Court 

finds that a receiver is necessary to determine whether and to what extent Defendants’ 

business practices may lawfully continue. See Alliance Doc. Prep., 296 F. Supp. at 1212 

(“[T]he public has a compelling interest in ensuring the robust enforcement of federal 

consumer protection laws and that interest would be harmed if Defendants were permitted 

to continue operations”). Defendants’ misrepresentations are material and go to the core of 

their services. Appointment of a receiver presents the best option to halt unlawful business 

practices. If certain of Defendants’ business practices may lawfully continue, appointment 

of a receiver also presents the best option to untangle the lawful from the unlawful, provide 

notice to consumers, mitigate consumer harm, and minimize any disruption in the 

processing of consumers’ applications and recertifications. See, e.g., id. at 1202 (charging 

receiver with management of the defendants’ businesses and assessing whether they could 

be operated lawfully). 

 12 Defendants mistakenly assert that the requested relief includes an asset freeze. As 

acknowledged by the FTC, it does not. Reply at 10.

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Additionally, the Court finds that a receiver is necessary to conduct an accounting 

and to preserve assets. Although Defendants contend that the dissipation of assets is not a 

concern, they fail to satisfactorily explain—or attempt to explain—various expenses 

identified by the FTC. For example, while Defendants generally suggest that some of the 

expenses may be legitimate, they fail to address any of the specific charges identified, such 

as $19,000 in cruise line expenses or $73,000 on custom wine tanks purchased from a 

business owned by members of Frere’s family. Moreover, while Defendants argue that 

compensation and distributions to Frere and other unidentified investors are permissible 

absent “ongoing, demonstrably deceptive practices,” the FTC has shown that Defendants 

engage in a pattern of deceptive conduct. Given that fact, substantial compensation and/or 

distributions are of concern. Indeed, even absent any illegitimate dissipation of funds, such 

expenditures deplete the assets that may be available for consumer redress. 

Finally, the FTC requests injunctive relief against the Companies, as a common 

enterprise, and against Frere individually. Defendants do not dispute the liability of the 

Companies or Frere. Based on the evidence presented, the Court finds that the Companies 

constitute a common enterprise over which Frere has control. See Order on MTD at 13, 14-

16. Nevertheless, the Court finds one provision of the proposed preliminary injunction to 

be inadequately supported. Specifically, subsection VII.B requires that Defendants transfer 

or deliver to the receiver possession, custody, and control of certain property, including 

“[a]ll assets held by Lancel Limited Partnership, an Arizona limited partnership established 

by Brandon Frere, that originated from the Corporate Defendants’ business practices.” 

Dkt. 22-1 at 10. The assertion that Lancel Limited Partnership is related to the Companies 

is conclusory, however, and the FTC fails to provide additional information about the 

entity. Subsection VII.B is therefore omitted without prejudice to the FTC’s ability to 

request amendment of the preliminary injunction upon a more robust showing.13

 13 Insofar as Lancel Limited Partnership falls within the purview of Subsection 

VII.E, nothing in this Order excuses its compliance with subsection VII or prevents the 

receiver from seeking to enforce compliance. 

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IV. CONCLUSION 

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

1. Defendants’ motion for leave to file a reply in support of their administrative 

motion to consider additional evidence, Dkt. 146, is GRANTED. 

2. Defendants’ administrative motion to consider additional evidence, Dkt. 140, 

is GRANTED. 

3. The FTC’s motion for a preliminary injunction, Dkt. 22, is GRANTED. A 

separate preliminary injunction shall issue. 

4. This Order terminates Dockets 22, 140, and 146. 

IT IS SO ORDERED. 

Dated: November 29, 2018 ______________________________ 

SAUNDRA BROWN ARMSTRONG 

Senior United States District Judge 

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