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|Higher One Refunds Students $11 Million as Part of FDIC Settlement|
- Monday, 13 August 2012 09:01
Higher One Refunds Students $11 Million as Part of FDIC Settlement
By Mike Holter
Higher One, a company that markets debit cards to college students, has agreed to refund nearly $11 million to 60,000 students as part of a settlement resolving allegations that the company charged students excessive fees for its student debit card account program, OneAccount.
The Federal Deposit Insurance Corp. (FDIC) accused Higher One and its former partner, The Bancorp Bank, of “deceptive and unfair practices” that included charging multiple overdraft fees on a single transaction, holding overdrawn accounts open for months to accumulate fees, and collecting fees on subsequent account deposits, which were typically funds for tuition and other college expenses from student financial aid.
Higher One is also facing a class action lawsuit over the fees that was filed in July 2012 by seven students in five states. The $5 million Higher One class action lawsuit alleges the company “improperly coerced” students into its accounts through a system that requires them to “opt out” of accounts the company opens without the students’ knowledge or consent. According to the class action lawsuit, Higher One “uses three tactics to make sure that students do not opt out of this default: first, it bombards students with unsolicited and deceptive marketing materials; second, it intentionally delays access to financial aid funds for students who choose to use other banking providers; third, it conceals the true costs of the Higher One accounts."
“Higher One then proceeds to assess and collect deceptive, unusual, unconscionable and, in many cases, unavoidable bank fees in these ‘captive’ banking accounts,” the class action lawsuit states.
In addition to refunding students $11 million in improperly assessed fees, Higher One also signed a consent order with the FDIC that it will no longer charge insufficient fund fees on accounts that have maintained a negative balance for more than 60 days. Higher One is also prohibited from charging more than three such fees to an account on any given day. The company will also pay a $110,000 civil penalty to the FDIC, while Bancorp will pay a $172,000 penalty.
The FDIC said the Higher One AccountNow refunds will begin distribution in December 2012, adding that the company has already begun to institute policy improvements to its overdraft practices and compliance management systems as suggested by the FDIC.
Updated August 13th, 2012
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Last Updated on Thursday, 27 December 2012 10:09