Hundreds of thousands of college students who were deceived about the terms of their debit cards by Higher One Holdings and WEX Bank will receive a total of $31 million in restitution, the Federal Deposit Insurance Corp. said.
The banking regulator slapped the companies with enforcement actions for allegedly omitting details about certain fees, features and limitations of Higher One’s One Account, a debit card backed by WEX Bank that colleges use to disburse credit balances. That balance is the money left over when a student’s financial aid award exceeds the tuition and fees owed to their schools.
The way colleges refund that money has been a point of contention among policymakers who have accused schools of steering students into onerous accounts in exchange for millions of dollars from financial partners, such as Higher One. Years of debates over the issue culminated in the Department of Education this year barring colleges from forcing students to have their credits placed on prepaid or debit cards that charge fees for overdrawing the account.
"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 a statement this week.
According to the FDIC, Higher One improperly collected $31 million in fees from students from May 4, 2012, to July 15, 2014. Regulators say the company failed to disclose on its website a complete list of fees, the availability of fee-free ATMs and details about other disbursement options. An estimated 900,000 students were harmed by the company’s omissions.
Eligible students are not required to take any action to receive compensation, which will vary based on the level of harm. Higher One must prepare a plan for dispensing the restitution within the next 60 days. Once the plan is approved by the FDIC, the company will have two months to start mailing out checks.