I must admit the American Financial Benefits Center, Ameritech Financial, Financial Education Benefits Center, and Brandon Frere must have incredibly creative attorneys advising them. Frankly, I’m not sure I get the path they are on.
Back in August of 2017 the American Financial Benefits Centers, a student loan document preparation company went with the strategy of proactively suing the Federal Trade Commission. You can see past posts here.
The complaint filed against the FTC seems to try to block any FTC action against the entities and/or seek clarification that the companies are not running afoul of the same issues that captured a number of other similar companies in FTC actions, click here.
Recent court filings by the parties provide an update on his this action is going.
American Financial Benefits Center Position
“Plaintiffs filed this lawsuit because they have been presented with one of two equally unworkable options: continue operating while the FTC states they are breaking the law and threatens closure of their businesses, or bow to the threat and cease operations without being able to test the legality of their practices. This is the situation they have faced for much of the past year. The FTC tells this Court that Plaintiffs’ claims are not ripe because its investigation remains in a preliminary stage where any possible outcome may be available, and which requires adjudication through specific procedural avenues.”
“The FTC’s conduct with other industry players reflects why this lawsuit is ripe for adjudication. Plaintiffs are faced with the daunting threats of being shuttered. As the Complaint notes, the FTC has shut down at least seven major companies in this industry over the last twelve months as part of a nationwide operation, and in each case the FTC has filed a federal court complaint to pursue its claims while seeking injunctive relief to stop those companies’ ongoing practices. However, with these Plaintiffs, the FTC apparently hopes their threats alone will drive them out of business. Plaintiffs are fully prepared to test the legality of their business practices in this Court.”
“The FTC has taken the public position that is undertaking a “crackdown” on alleged student loan debt relief scams. The “crackdown” was part of the FTC’s nationwide “Operation Game of Loans,” which resulted in 36 total actions, 7 by the FTC, aimed at shutting down companies in the student loan document preparation service industry. Those complaints were nearly identical, involved causes of action for injunctive relief, and overlapped significantly with the complaint the FTC has authorized for filing against Plaintiffs. Plaintiffs are ready and willing to defend their practices. However, the FTC’s action has affected an entire industry group and demanded unquestioned conformity that poses immediate threats.”
You can read the full document, here.
Having run a debt relief company myself I completely see where American Financial Benefits Center is coming from in their desire to seek clarification. It appears they feel they are running a compliant operation which should not face the possibility of being shut down by the court when there appears to be an argument to be made. I get that.
But what the complaint and position by American Financial Benefits Center misses is they are trying to thrive and be the “good guys” in an industry which has demonstrated time and time again that it is in general not providing valuable outcomes based on programs sold.
For example, many such doc prep programs say they are not providing specific financial advice but charging to simply prepare documents. Financial problems and student loan issues are far bigger than a technical solution of fitting X loans into Y program. A larger point of view is needed which can only really be obtained through an expert consultation with someone who can understand the bigger financial picture, current financial goals, future financial goals, age, and retirement savings plan.
A basic rule in the debt relief space is consumers who are being sold debt relief services or who have financial problems will be considered by regulators to be a disadvantaged class of people. In light of that fact and the previous bad actors which have come and gone before, I find it unlikely American Financial Benefits Center will prevail in this effort. If anything its just put more intense FTC focus on their actions and efforts.
The FTC Position
“We showed in our motion to dismiss that the Court lacks jurisdiction over plaintiffs’ attempt to preemptively immunize themselves from FTC enforcement for two core reasons. First, the only cause of action plaintiffs could have against the FTC would come through the Administrative Procedure Act [APA], but they do not satisfy the basic prerequisites to file a suit under that statute. They do not challenge any final agency action and they obviously will have an adequate remedy in court to raise all their legal claims should the FTC bring a case against them. Second, plaintiffs’ claims are unripe. They challenge no final action and they show no genuine hardship from any deferral of their claims to an enforcement proceeding.”
“Plaintiffs claim that the APA does not apply here because the FTC “has disavowed any potential administrative process.” Opp. 1. But even if that were true — which it isn’t —
plaintiffs have not shown that they have a valid cause of action other than through the APA. Nor have they even attempted to show either that they challenge a final action or that they will be unable to raise all their legal arguments in an enforcement proceeding—both prerequisites to suit under the APA.”
“They do not contend, for example, that the TSR itself is invalid. Rather, they are challenging the applicability of that rule to their business practices and the agency’s authority to bring an enforcement action against them. Those are very different circumstances—and courts have unanimously ruled that pre-enforcement judicial review in such circumstances is unavailable.”
“Plaintiffs assert that they are currently suffering harm because the “FTC has concluded its investigation” and “disavowed any potential administrative process.” Opp. 10. These assertions do not establish a current harm. At most, they show that FTC staff believes that plaintiffs have broken the law. But staff has not ordered plaintiffs to stop any activity—and it lacks the power to do so. Indeed, the FTC has not even asked a court to preliminarily enjoin the plaintiffs, or even filed a complaint against them. Staff reaches such conclusions in nearly every case brought by the FTC; plaintiffs’ position would mean that every single target of an investigation may preempt enforcement by seeking declaratory judgment. That is exactly the outcome that the Supreme Court warned of when it cautioned against “turning prosecutor into defendant.”
“Plaintiffs also claim that they are harmed because the FTC has recently begun an enforcement campaign (called “Operation Game of Loans”) against multiple providers of student loan debt relief services. The nature of plaintiffs’ alleged harm is difficult to fathom. They con-tend that the operation somehow constitutes “industry-wide actions by government agencies” that “demand unquestioned conformity,” and thus “poses immediate threats” to them (though what threats they do not specify).”
“First, the enforcement campaign is merely a name given to a series of separate and independent enforcement actions filed in different courts against different groups of defendants for individual adjudication. Thus, even if an “industry-wide” action demanding “conformity” could cause harm, “Operation Game of Loans” does not fit the bill. To be sure, the complaints target the same types of consumer harm and allege violations of the same laws, which is why they contain some similar language. But each case turns on its individual facts. For example, unlike the FTC Game of Loans cases that plaintiffs seek judicial notice of, plaintiffs enrolled consumers seeking student debt relief in a “supplemental membership benefits” program that involved a spectrum of services that are unrelated to student loans, ranging from roadside assistance to medical savings cards and telemedicine. See FAC ¶23; Mo. 5. Thus, unlike those FTC Game of Loans cases, proving the case against plaintiffs may entail examining whether consumers were aware that they had purchased services unrelated to student loan debt relief and that their payments were directed to those services rather than to paying down their student loans.”
You can read the full court document, here.
I understand why American Financial Benefits Center feels threatened. But a core issue here is the student loan assistance industry has FAILED to police itself and weed out bad actors to make room for good companies.
As a result all companies will be painted with the same broad brush and regulations will flow over good and bad. That’s nothing new and it’s the way it has always been and always will be.
As long as American Financial Benefits Center insists in operating in this space, regardless of the reasons why, they and all other companies are always facing the threat of regulatory action by the FTC, CFPB, or State Attorney General.
But seriously, if American Financial Benefits Center, Ameritech Financial, Financial Education Benefits Center, or Brandon Frere are going to upsell consumers into ancillary benefits programs that’s a huge regulator red flag.
Even a quick review of the current American Financial Benefits Center website raises some flags that may trigger any regulator.
- “We have helped thousands of people pay off their student loan debt, build wealth, and secure their financial futures.” – I wonder how many clients have achieved those plain language goals.
- “The best part is, you’ll never have to worry about missing future program benefits as we will keep you informed, and aware of any changes that may benefit your current situation. No more waiting on hold for hours with over-inflated, out-of-touch financial servicing company’s that want to get you off the phone!” – Financial servicing company?
- “Through our extensive document preparation and financial analysis services, AFBC will make sure that each student borrower is receiving the maximum benefits available to them.” – What benefits are maximized? Is it paying off student loans, building wealth, or securing their financial futures?
Just as an outsider looking in I struggle to see how AFBC can position themselves as a general financial adviser while they most prominently feature their student loan services and more importantly the front page prominent disclaimer:
“American Financial Benefits Center specializes in federal student loan document preparation and processing services to assist borrowers identify and gain approval for one or more government debt relief programs. We are not a government agency, the Department of Education, or your loan servicer. American Financial Benefits Center is a private company, not affiliated with the government or your loan servicer.
You may review various options and apply for the same government debt relief programs through the Department of Education without paying a fee. However, we pride ourselves in providing value in saving time for consumers to maneuver everything just as a tax preparation specialist charges fees for its services, even though consumers can complete their documents on their own.” – Source