Fraud and False Advertising Laws
Fraud is the misrepresentation of material fact to the detriment of the consumer.
Many scholarship scams violate federal and state laws against fraud and false advertising. Most states prohibit false advertising and deceptive acts or practices in the conduct of any business, trade or commerce. The FTC Act also prohibits deceptive acts or practices, including the false and misleading representation of material facts.
False advertising is defined as advertising that is misleading in any material respect, either explicitly or indirectly through representations made in a statement or combination of statements and any failure to reveal material facts.
Some scholarship matching services guarantee that you'll receive at least $1,000 or $2,000 or they'll refund your money. Such guarantees are fraudulent, because the service has no control over your performance. You can't get around doing the work yourself, and if you do the work, they can't guarantee the results.
A guarantee is also fraudulent when it has so many restrictions and qualifications that it is meaningless; when material requirements of the guarantee are not disclosed up front (e.g., the written guarantee differs from the verbal guarantee given over the phone, after the consumer has already paid the vendor); when the guarantee is deceptive or misleading (e.g., it gives you an unreasonable expectation of success in receiving scholarship money or falsely gives you the impression that the service is without risk); or when the business fails to honor its guarantee.
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