The Federal Trade Commission announced that it has settled a "Project $cholar$cam" case against Florida-based College Assistance Services, Inc., and two of its principals, Linda Love and John Giuffrida. The settlement would prohibit Love and Giuffrida from selling scholarship search services and would require each defendant to post a $200,000 bond before engaging in a telemarketing business or assisting others engaged in such a business.
In conjunction with the Commission’s action, the Florida Department of Agriculture and Consumer Services (DACS) also successfully revoked the defendants’ telemarketing license and redeemed the $50,000 telemarketing bond posted by College Assistance Services (CAS) under Florida law. DACS sent claim notices to CAS consumers and will distribute the proceeds of the bonds to consumer claimants. As a result, several hundred consumers will receive partial restitution.
The FTC initiated "Project $cholar$cam" in September 1996 as a law enforcement and consumer education campaign to protect college-bound students and their families from fraudulent college scholarship services that "guarantee" that customers will receive a minimum amount of scholarships -- usually $1,000 -- in return for up-front fees ranging from $10 to $400. College Assistance Services charged a fee of $179, the FTC said.
According to the FTC’s complaint, CAS sent tens of thousands of postcards to high school and college students advertising scholarship services and listing an 800 number. Company telemarketers told consumers who called the number that, for a $179 up-front fee, the service could find "unclaimed" scholarship and grant funds from private companies, and guaranteed to refund the fee if the student did not get at least $1,000. The FTC alleged that consumers received either nothing at all, or a list of "sources" for financial aid for which the students had to apply on their own or which, in fact, were contests, loans or work-study programs. Many sources were no longer available or not suitable for the student, the FTC alleged. Students seeking refunds had to apply in writing to each source on the list and provide rejection letters; even then, many did not receive refunds, according to the complaint.
Under the proposed settlement, the defendants would be permanently banned from promoting or selling college scholarship services and would be required to post a $200,000 bond before engaging in any telemarketing. The order also would prohibit them from making numerous misrepresentations, and includes a general prohibition against misrepresentations of material fact in connection with the marketing of any product, service, or investment. In addition, the consent order would prohibit them from violating the FTC’s Telemarketing Sales Rule. That rule requires telemarketers, among other things, to give consumers detailed information about the costs and restrictions of any product or service sold via telemarketing. The conduct provisions in the settlement would bar the defendants from selling or transferring consumer lists.
As of November 1997, the Commission has filed lawsuits against nine college scholarship services and has distributed more than 2.9 million pieces of consumer education materials, including posters, bookmarks, and flyers. The agency’s consumer education materials have been circulated to college financial aid offices, high school guidance counselors, state grant and aid program administrators, and college book stores nationwide. These materials are available on the FTC’s web site at: http://www.ftc.gov(no period).
The Commission vote to approve the settlement was 4-0. The settlement was filed in the United States District Court for the Southern District of Florida in Miami. The FTC received assistance from the Florida Department of Agriculture and Consumer Services in this case.
NOTE: This consent order is for settlement purposes only and does not constitute an admission by the defendant of a law violation. Consent orders have the force of law when signed by the judge.
Copies of the complaint and final order, a free package of consumer information from the FTC on how to identify a fraudulent scholarship search service, and a news release regarding "Project $cholar$cam" are available from the FTC’s web site at: http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, DC 20580, telephone: 202-326-3128; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.
(FTC File No. X960093)
(Case No. 96-6996-CIV-HIGHSMITH)