• Sat. May 14th, 2022

Feds arrest student debt relief CEO who allegedly scammed borrowers out of $28 million

ByTina R. Wimmer

Mar 11, 2021

In the summer of 2017, Beverly Sills, an employee at Veterans Affairs Hospital in Memphis, Tennessee, discovered that she hadn’t made a payment on her student loans since December 2015, despite sending about $3,000 during that time to Ameritech, a company she thought she was running. his debt, according to court documents.

About a year ago, Craig Davis of Erie, Pennsylvania received a call from his bank reporting a bounced deal. He discovered that Ameritech withdrew $207 from his account a few weeks after a rushed conversation with a company representative who convinced him to electronically sign several documents thinking they would help reduce his student debt, according to reports. court documents.

Meanwhile, Brandon Frere, the chief executive of Ameritech and two other companies involved in the student debt relief business, is said to have trained his representatives to push clients to exaggerate their family size in the hopes. to benefit from more favorable student loan terms, a criminal complaint filed against him last week alleges.

Frere also allegedly attempted to withdraw money held in escrow by clients, transfer millions of dollars of company money to his own accounts, and spend hundreds of thousands of dollars of company money. business in travel, cars and other items, according to the complaint. Overall, prosecutors estimate that Frere’s companies collected $28 million from student borrowers seeking relief over the course of four years. In some cases, borrowers never got the help they were looking for. In others, their balances increased during the time they were paying Frere’s companies, according to the Federal Trade Commission.

The FBI arrested Frere last week at San Francisco International Airport. He was on his way to Cancun, Mexico with $3,900 in cash, five blank checks from his businesses, two blank checks from his personal account, his Social Security card and 10 credit cards and gift cards, between others, according to a filed memo. by the FBI in support of his detention.

That same day, Frere booked his ticket to Cancun, but days before he left, he withdrew $400,000 from accounts associated with the businesses, according to the FBI memo. Of that amount, $179,000 was transferred to his personal account and the rest went to attorneys and family members, the FBI said. He was released from prison on a $3 million bond Monday, according to a local report.

Days before Frere attempted to leave for Mexico, a judge granted a motion for a preliminary injunction filed by the Federal Trade Commission in a lawsuit the agency filed against Frere’s companies earlier this year. Frere’s businesses have been placed in receivership – a situation similar to bankruptcy where an outside entity manages a company’s finances.

One of the attorneys representing Ameritech and its associated companies in the FTC case declined to comment on the ongoing litigation. One of the attorneys representing Frere in the criminal case did not immediately respond to a request for comment, but according to the Democratic Pressa Northern California news outlet, he argued in court that there was nothing untoward about Frere’s money transfers and that he was acting in good faith as the FTC case unfolded. continued,

Although the circumstances of Frere’s arrest are exceptional, the scheme he and his companies allegedly perpetrated are not uncommon. Student loan scams, like the one described in the criminal complaint against Frere and the lawsuit filed by the FTC, have proliferated in recent years as student debt continues to climb.

The FTC and some state attorneys general have worked to crack down on these companies, which often prey on troubled borrowers confused about their options. While these efforts have succeeded in putting many of these companies out of business, the industry continues to thrive, said Persis Yu, director of the Student Loan Borrower Relief Project at the National Consumer Law Center.

“It’s really a mole-punching game,” Yu said.

In the case of Ameritech’s and Frere’s other companies, prosecutors and the FTC allege they lured borrowers with shippers promising they were “prequalified” for debt relief. They reportedly charged an upfront fee of $600 to $800 to prepare and submit documents to borrowers interested in the government’s repayment and forgiveness programs – something they can do for free, according to court documents.

The companies also charged borrowers a monthly fee ranging from $49 to $99 for a financial education membership program and were often not transparent about the fee structure, attorneys, and FTC claim. In some cases, company representatives confused borrowers’ student loan repayments with the fees the companies would charge them, according to court documents.

The sheer scale of student debt outstanding — $1.5 trillion held by 44 million people — has created a population ready to be abused by bad actors, Yu said. available to borrowers and the difficulties they often face in getting the information they need from their managing agents often means that borrowers find themselves drawn to scam artists who offer to help them lower their payments.

For borrowers looking to avoid these types of scams, Yu advises them to make sure they know who their servicing agent is. This way, borrowers can tell the difference between legitimate communications about their student loans and scams. “They definitely take advantage of people not knowing who they should be communicating with,” she said.

“I hope it will have a deterrent effect,” Yu said of Frere’s case. “But we need to make sure that borrowers will get the help they need without going through the scammers.”