Scholarship Company Sued For Fraud
Attorney General Spitzer today announced his office is taking legal action to stop a California-based college scholarship scam that has preyed upon vulnerable New York families.
Luz Scholarships, and its sole proprietor, Ullany Smith of Long Beach, California, have been sued for fraud and false advertising. Since at least 1998, Luz Scholarships has been operating a scholarship scam, buying lists with the names and phone numbers of middle school and high school students and then targeting the students with false promises of college scholarships.
"Luz Scholarships stole the dreams of students needing to make their college education more affordable," Spitzer said. "The company targeted financially-strapped families and duped them into paying fees for services they could have easily obtained for free at any local library."
Luz's telemarketers would contact these families and invite them to "seminars" held throughout the country, including several in New York City. At these seminars, Luz Scholarships induced students and their parents to pay between $150 and $170 using false representations that the risk-free payment would be refunded if the company failed to link a student successfully with a scholarship. Luz claimed to have a database of half a million companies that were willing to provide scholarships, and that 80 percent of these companies did not have restrictions related to grades or financial need.
In some cases, Luz actually offered to file scholarship applications for students, although Spitzer's office has yet to find one situation in which the company did so.
According to Spitzer's office, Luz repeatedly and persistently failed to fulfill any or all of its promises. Many customers received nothing at all for their money. Those customers who did receive information merely received a "profile" which contained a generic list of purported scholarship sponsors - not at all tailored to the student - derived entirely from information available free of charge at any public library or school financial aid office.
Much of the information was useless to students because either the scholarship sponsor's addresses were out-of-date, the sponsor had discontinued giving out scholarships, scholarships were restricted to employees, or the sponsor had never actually given out scholarships.
At no time during the investigation did Luz Scholarships provide evidence that a single customer received a scholarship due to its services.
The company also avoided dealing with disgruntled customers or giving refunds.
Spitzer's lawsuit seeks refunds for Luz Scholarship's customers, civil penalties and a permanent injunction barring the company and Smith from committing any further fraudulent, deceptive and unlawful practices.
Individuals with complaints against Luz Scholarships or any other scholarship company are encouraged to contact the Attorney General's consumer help line at (800) 771-7755. In New York City, consumers should call (212) 416-8300.
This case is being handled by Assistant Attorneys General Hillary Weisman and Joy Feigenbaum of the Consumer Frauds and Protection Bureau.
The Attorney General offered the following tips for individuals and families seeking financial assistance for college:
Steer clear of guarantee claims related to scholarship assistance. No one can guarantee a particular individual will be chosen for scholarship money. And be careful, you can't collect on a refund from a scam artist;
- Stay away from organizations that require you to provide a credit card number in order to "hold" scholarship money. Providing such information is likely to result only in unauthorized charges to your credit account;
- Be wary of companies that - for a fee paid in advance - offer to fill out and send all the scholarship application paperwork: there really is no way around the student's active participation in the completion of scholarship forms;
- Don't pay a fee for scholarship money. Free money shouldn't cost a thing;
- Do some research before entering a contest or accepting a scholarship from a foundation or organization with which are you are not familiar; and
- Check with your guidance counselor, your school financial aid office, or local library for information on college scholarships.