Free money comes with a steep price

Spending just $1.98 for shipping and handling for a CD to help you find "free money" through government grants could seem like a pretty good bargain when money is tight.

But consumers are flooding the message boards that the charges won't stop there. Oh, no. Things got so bad that one consumer said this deal was "synonymous with Bernie Madoff."

How much can $1.98 cost you?

Heather Priestman, 31, paid $1.98 earlier this year with a debit card to get information about getting a grant for starting a small business or going back to school. She saw the pitch for "Grant One Day" on an infomercial.

But once she used her debit card, another $190 or so was quickly taken out of her checking account. She didn't notice it right away because she doesn't always use her checking account. So then, she ended up with overdraft charges of about $200 when she tried to write checks to cover other bills.

"It was a nightmare of a decision," said Priestman, who lives in Marysville, Mich., and is laid off.

As consumers deal with a brutal economy, they need to pay attention to warnings about easy money con artists.

"They raise people's hopes and then they drive them deeper into the hole," said David Vladeck, director of the Federal Trade Commission's Bureau of Consumer Protection.

Last week, the FTC announced a crackdown on scammers who take advantage of the economic downturn. Operation Short Change targets several schemes, including bogus government grants. See www.ftc.gov.

Law enforcement action was taken against a company called Grants for You Now with the Web sites grantsforyounow.com, grantoneday.org, and easygrantaccess.com.

According to the FTC, the grant promotions "deceived consumers by promising them free government grant money to use for personal expenses or to pay off debt."

According to the FTC complaint, after obtaining consumers' credit or debit account information to process a $1.99 fee, the defendants failed to adequately disclose that consumers would be enrolled in a membership program that cost as much as $94.89 a month.

Some consumers also were charged a one-time fee of $19.12 for a third-party Google Profit program. The FTC said all the defendants' Web sites falsely offered a "100% No Hassle Money Back Guarantee." This case was filed in the U.S. District Court for the Central District of California.

The bottom line: You can't get grant money that easily. Tim Burns, public affairs director for the Better Business Bureau Serving Eastern Michigan, said scam artists want access to your credit card or debit card, making it possible for you to lose even more money.

Priestman thought she was safe because she decided to cancel the service immediately. She had a bad feeling she made a mistake. She said more charges hit even after the company said it would cancel the order.

"Some people don't even notice the charges for a while," Burns said.

The scam is similar to one that I wrote about earlier this year with so-called free trials for diet drugs or acai berry weight-loss promotions.

Instead of playing up the need to lose weight, these scam artists play up the need to get money fast.

"Just like everybody else, I was curious about how to get money for school," said Cathi Koski, 39, who was laid off about six months ago from an auto supplier for General Motors Corp.

She signed up for a grant promotion that she saw online.

She figured if it didn't work, she'd be out about $2.

Suddenly, she was out $98.89. She immediately canceled the credit card so she would not get charged more.

She didn't get the CD for 12 days-and then it was full of invalid Web sites, she said.

"The information on the disc is totally useless," said Koski of Sterling Heights, Mich.

When she contacted the company, she'd get auto-generated e-mails and had a horrible time trying to get her money back. She eventually got the money after help from the Better Business Bureau. But she said she wants other consumers to save their money.

"They don't just give grant money to anybody," she said. "They don't give money away like that."

To help consumers understand how easy it is to be conned-and how to avoid fraud-the FTC produced a new consumer education video featuring a former scammer who hawked phony business opportunities and ultimately served prison time for deceiving investors. In the video, the former scammer gives an insider account of how these operations use high-pressure tactics and celebrity endorsers to trick cash-strapped consumers, and how consumers can protect themselves by demanding written disclosures on earnings and other sales data.

To view more videos, go to ftc.gov or YouTube.com/ftcvideos.

ADDITIONAL FACTS

How you can avoid free-money scams:

- Stay away from any trial offer that has a small handling or processing fee that can be paid with your debit or credit card. Consumers often discover that without any notice, they're charged monthly fees of $50 to $100 because the company has their account number.

- If you must pay anything to get information about grants, it could be a scam. A legitimate Web site for searching for grant money is www.grants.gov. The information is free. You can also sign up for free e-mail alerts there.

- Do not give your Social Security number or credit card information if you're offered a grant out of the blue.

- Government grants require an application process-and are never guaranteed.

- Government grants aren't given just for being good taxpayers. Most government grants are awarded to states, cities, schools and nonprofit organizations to help provide services or fund research projects. Grants to individuals may be for college expenses or disaster relief. Other useful Web sites for free information are www.fafsa.ed.gov and www.govbenefits.gov.

- Go to www.bbb.org to get a free report on any company.

- See www.complaintsboard.com for a listing of consumer complaints.

(c) 2009, Detroit Free Press.

Distributed by McClatchy-Tribune Information Services.