Nearly one million college students who received financial aid payments through Higher One, an institution-affiliated party of WEX Bank, were victims of deceptive practices, according to the Federal Deposit Insurance Corporation (FDIC).
The affected students will share $31 million in restitution, according to the terms of a settlement between the financial institutions and the government. In addition, the financial institutions will pay a total of nearly $4 million in civil penalties.
When colleges and universities hand out financial aid to students, they use a firm such as Higher One to actually make the payments. After tuition and fees are paid directly to the schools, the rest of the aid, such as money for books, supplies, and living expenses, can be disbursed to students through Higher One's "OneAccount."
The OneAccount is a debit card-based product that is offered in partnership through financial institutions. WEX Bank has offered the OneAccount since May 4, 2012, according to FDIC.
Omitted important facts
After an investigation, the FDIC concluded that the Higher One website and marketing materials, which were approved by WEX Bank, omitted important facts about certain fees, features, and limitations of the OneAccount in violation of the Federal Trade Commission Act.
Left out, the complaint alleges, were details about other disbursement methods available to students, a full and complete fee schedule, and the availability of fee-free ATMs. As a result of these material omissions, FDIC charges Higher One improperly collected $31 million in fees from students from May 4, 2012, to July 15, 2014, the period covered by the enforcement action.
"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. "Today's action holds both the bank and its student card partner accountable for the practices related to the products they offered to college students and provides restitution to those students harmed by these practices."
In trouble before
This is not Higher One's first brush with regulators. In 2012, it was required to pay $11 million to 60,000 students over the ATM transaction fees it charged.
If you are an affected student, the FDIC says you do not have to take any action to collect compensation. The financial institutions will contact you.
At the same time, former students should be on guard against scammers who claim to be representing one of the parties and demand some kind of “fee.” No payment of any kind is required to receive compensation.