NYC "$CHOLAR$CAM" Defendants to Pay $7,500 in Settlement of FTC Charges

Two principal officers of New York City-based Student Aid Incorporated have agreed to pay $7,500 to settle Federal Trade Commission charges in connection with the college scholarship search service they ran. The settlement order also would bar Adel Kovaleva, Raimma Tagiev and Student Aid from misrepresenting any similar service they offer in the future; require them to disclose all terms and conditions of any refund policy; and prohibit them from withdrawing money from consumers' checking accounts without authorization, among other prohibited conduct.

The FTC had filed charges against these defendants on August 28, 1996, as part of Project $cholar$cam, a law enforcement and consumer education campaign targeting alleged fraudulent scholarship search services. In the Student Aid case, the FTC alleged that the defendants guaranteed consumers that for an up-front fee of $97 they would obtain at least $1,000 in scholarships or grants for the consumers. In fact, the FTC alleged, the defendants almost never obtained scholarship money for consumers. The FTC also alleged that the defendants falsely represented that refunds of the $97 application fee would be readily available. In fact, they imposed such onerous refund conditions -- for example, requiring students to provide a rejection letter from each source on the list they received, which often included scholarships for which deadlines had passed or students did not qualify -- that many consumers could not obtain the refunds. The FTC also charged the defendants with withdrawing money from customers' checking accounts without authorization.

Fraudulent scholarship search services are easily identified, the FTC said in announcing Project $cholar$cam -- they are the ones that guarantee a scholarship or a certain amount of scholarship or grant money in return for an up-front fee. The FTC also suggested that students and their families examine money-back guarantees very carefully before paying any money, because the FTC has found that many firms impose burdens similar to those in the Student Aid case that make it very difficult or impossible to obtain the refund. Additional consumer education materials issued with the Project $cholar$cam campaign can be found at the FTC's web site at www.ftc.gov and also can be obtained from the FTC's Public Reference Branch at the address below.

Upon filing the charges in the Student Aid case, the FTC won a court order temporarily halting the scheme, freezing the defendants' assets, and appointing a receiver to run the firm. The parties subsequently agreed to a preliminary injunction. This settlement, if approved by the court, would end the litigation.

In addition to requiring the $7,500 redress payment by Kovaleva and Tagiev, the settlement specifically would prohibit false claims:

• about the likelihood that consumers will obtain scholarship money, or that they will do so with little effort on their part;

• about the past success of the defendants in obtaining college money for consumers;

• that the defendants will provide information about scholarships or grants for which the consumer is qualified;

• about the way in which a consumer's bank account or credit card information will be used; and

• that a consumer automatically will be refunded any money or any other aspect of a refund policy.

The order also would require the defendants to obtain written authorization before debiting consumers' checking accounts or charging their credit cards, and to disclose all terms and conditions of any refund policy.

Finally, the order contains various record keeping and reporting requirements that would assist the FTC in monitoring the defendants' compliance.

The Commission vote to approve the settlement for filing in court was 5-0. It was filed today in U.S. District Court for the Southern District of New York, in New York City, and requires the court's approval to become binding.

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 documents associated with this case, as well as other Project $cholar$cam documents and materials, are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326-2222; 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. X960115)

(Civil Action No. 96 Civ. 6548 (LMM))