FTC Crackdown on Scholarship Search Service Frauds Nets Another Case

Agency Wins Court Order Temporarily Halting Business of Deco Consulting of Florida

"[A] recent addition to our file has made your student eligible for our college scholarship and grant assistance program. We will be accepting a number of students on a first come first served basis for a minimum of $1,000..."

If this claim is familiar, it may be because you’ve seen it on one of the millions of postcards sent out by companies posing as legitimate scholarship search services to exploit the financial worries of college-bound students and their families. These firms guarantee college money in return for up-front fees ranging from $10 to $400, but often give consumers nothing of any value. Or perhaps you heard about "Project $cholar$cam," a Federal Trade Commission crackdown on fraudulent scholarship search services announced in September. Today, the FTC said it is continuing to investigate problems and announced yet another case, this one against a company called Deco Consulting Services, Inc., and its counterpart, Unimark Industries, Inc., both of Lauderhill, Florida. A federal district court judge has issued an order temporarily halting the firms’ business and freezing their assets pending trial on FTC allegations that they charged thousands of consumers $179.50 to $198.50 each for information that turned out to be useless, outdated or not what was promised. The FTC alleged that few, if any, consumers received the promised minimum of $1,000 (or, more recently, $2,000) in scholarships or grants.

The FTC complaint detailing the charges in this case also names Deco general manager Jesse Nieves (a defendant in a prior FTC case involving the deceptive telemarketing of water purifiers), and Deco president Dania Denis. The complaint alleges that the defendants have been in business since at least 1990, and have sent out more than a million postcards to high school and college students or their parents throughout the United States. The postcards make the statement shown above and list a toll-free number for more information. Those who called were told that large amounts of scholarship and grant money goes unclaimed and that it is distributed on a first-come, first-served basis. The defendants also promised callers that they would get a guaranteed minimum of $1,000 or $2,000 in scholarships or grants by applying to the sources on a list Deco would send them, the FTC alleged.

In fact, however, the lists often arrive much later than promised; many of the sources offered loans, contests or work-study programs rather than grants or scholarships; the deadlines often had expired; or the sources had moved, no longer existed or were not suitable for the student, the FTC charged. Moreover, consumers who wanted their money back based on the defendants’ promise of a full refund found out that they first had to apply to many or all of the sources on the list and document that they had been rejected, a practice that deterred consumers from requesting or obtaining a refund, the FTC alleged. These refund restrictions weren’t disclosed to consumers until after they had paid, the FTC added.

"Those few consumers who are able to obtain a full or partial refund do so only after complaining to the Better Business Bureau or a governmental agency, or after contesting Deco’s charges with their credit card issuers," the FTC complaint states.

This scenario is not unlike those the FTC saw in its first five Project $cholar$cam cases brought against fraudulent scholarship search services. Today, the FTC again cautioned con sumers that a guarantee of scholarship money is the clue to fraud, and suggested consumers be wary of claims that the search service will do all the work, that it has special access to scholar ship information, or that millions of dollars worth of unclaimed scholarship money is available to the first in line.

As in the other cases, the FTC is seeking a permanent injunction prohibiting the defen dants from engaging in similar deceptive business practices, as well as judgments for consumer redress for providing refunds to consumers. A hearing on this case will be scheduled shortly. The FTC received assistance in this case from the Better Business Bureau of South Florida and the Broward County Sheriff’s Office.

The FTC also announced that Project $cholar$cam’s extensive consumer education component has been expanded even more since the program first was announced to include new partners. Through its WorldNet service, for example, AT&T will link Internet visitors to the FTC’s Scholarship Scam Alert home page, joining 15 Interactive Services Association member companies in promoting the FTC’s education efforts, the FTC said.

The FTC vote to file the complaint was 5-0. It was filed under seal in U.S. District Court for the Southern District of Florida, Fort Lauderdale Division, on Oct. 18, 1996. The seal was lifted yesterday afternoon.

NOTE: The Commission files a complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the defendant has actually violated the law. The case will be decided by the court.

Copies of the complaint, as well as information about and consumer materials associated with Project $cholar$cam are available 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 news releases, related documents and other materials also are available on the Internet at the FTC’s World Wide Web site at: https://www.ftc.gov

Dean Graybill

Bureau of Consumer Protection
202-327-3284

(FTC File No. 962 3250)
(Civil Action No. 96 7196)