Students can’t necessarily trust a debit card connected with their school to give them a fair deal.
That’s the message behind a crackdown by bank regulators on Wednesday. Higher One, a provider of campus-linked debit cards, was ordered to pay fines and restitution to more than 1 million students who signed up for its “OneAccount” cards, bank regulators announced.
Connecticut-based Higher One partners with colleges that want to offload the chore of paying out students’ financial aid money, or what’s left of it after tuition and school fees are deducted. Working with bank partners, Higher One provides students with a debit card — often emblazoned with the school logo — that holds students’ remaining financial aid.
But the company and its banking partners left out key details about fees and features that misled students, bank regulators said. In separate enforcement actions involving different banks, the Federal Reserve and the Federal Deposit Insurance Corp. ordered the companies to reimburse $55 million to about 1.5 million students who signed up for the accounts between 2012 and 2014.
“It is important that financial products offered to college students under the sponsorship of their universities are clear, transparent, and trustworthy,” FDIC Chairman Martin J. Gruenberg said in announcing the crackdown.
Higher One agreed to the fines and reimbursements without admitting wrongdoing, according to settlement documents. WEX Bank in Utah, Cole Taylor Bank in Illinois and Customers Bank in Pennsylvania were also fined in the settlements. The companies’ marketing practices violated the Federal Trade Commission Act, bank regulators charged.
Students have gone so far as to protest Higher One’s marketing on some campuses, saying they were steered into accounts that carried surprise costs, including inactivity fees when they tried to stop using the accounts.
“Students have been unnecessarily pushed into these bank account on campus, and their fees have gone up as a result,” Chris Lindstrom, higher education program director at U.S. Public Interest Research Group, said in a statement.
Wednesday’s orders were the second regulatory crackdown this month involving colleges’ marketing ties with financial institutions. The U.S. Consumer Financial Bureau said Dec. 16 it sent warning letters to 17 colleges for failing to disclose marketing agreements with credit card issuers as required by law.