MINNEAPOLIS (CN) - The Minnesota attorney general says a California company called Dream Scholars preys upon parents by falsely claiming that it provides college scholarships to underprivileged kids, and that their children showed interest in its SAT and ACT preparation materials. But the Dream Scholars Foundation has never handed out any scholarship money, and it automatically enrolls victims in a "free" online program, then charges them $55 a month, the state says.
Dream Scholars fka Scholarship Fund America calls itself a "grassroots charitable foundation," and claims its goal "is to transform the lives of underprivileged high school students through the realization of a college education," and tells consumers that it needs private funding to do so, Attorney General Lori Swanson claims in Hennepin County Court.
Swanson says the so-called nonprofit foundation telephones parents of high schools students, falsely tells them that their child has expressed interest in Dream Scholars' test prep materials, and persuades them to make a $165 "donation" or "contribution," in exchange for the products. The group had collected $1.5 million as of November 2009.
The company has told parents that its products are endorsed by their child's school, though the "foundation" has never visited a Minnesota school, Swanson says.
Dream Scholars also solicits consumers through its Web site, and offers a test preparation "gift package" - in exchange for a $255 online donation, Swanson says.
While the company offers a 30-day money back guarantee, it gives consumers the runaround if they claim it, Swanson says. She adds that requests for refunds to Dream Scholars' Donor Relations office often go unanswered.
Dream Scholars also automatically enrolls consumers in a free "30 day trial" of its online services, without the consumer's knowledge, then charges $55 per month until they cancel the service, Swanson says. The attorney general says that Dream Scholars' "database" is "nothing more than links to other scholarship Web sites that can be accessed free of charge."
One victim of the alleged scam said she was happy when Dream Scholars called and told her that her son had expressed interest in its products - implying that the materials had been presented at his school - because he had never shown any interest in test preparation materials before. The victim bought the materials, then heard from her son that he had never heard of Dream Scholars, then was refused a refund from the company, according to the complaint.
Dream Scholars told one mother that her daughter had shown interest in its products, which she believed because "it knew her daughter's name and claimed affiliation with her high school," the complaint states.
Swanson says that since Dream Scholars began in 2008, it has donated only $23,000 to one California organization, and has admitted that it has not put money toward scholarship grants for underprivileged students.
Swanson demands restitution and civil penalties for consumer fraud and deceptive trade.
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