Fed, FDIC Order 1.5 Million Students To Be Repaid For Unnecessary Fees

Omitted Information

The Fed said Higher One omitted information about how students could get financial aid disbursement without having to open a OneAccount, about its products’ fees, features, and limitations, and about the availability of automated teller machines where students could access financial-aid disbursements for free.

The company also prominently displayed school logos, suggesting the institutions endorsed the product, according to the Fed’s release.

“Student debt is already a big burden, and these illegal practices just added insult to injury,” said Rohit Chopra, senior fellow at the Center for American Progress and former student-loan ombudsman at the Consumer Financial Protection Bureau. “Higher One was the big fish in the market,” and “this market has really been cleaned up now.”

Students who opened a OneAccount at Cole Taylor Bank of Chicago or Customers Bank of Phoenixville, Pennsylvania, from May 4, 2012, through December 19, 2013, will be reimbursed for the fees related to the deceptive practices, according to the Fed release.

The central bank took action against Cole Taylor Bank in June 2014 and is pursuing action against Customers Bank, the statement says. The FDIC order requires Higher One to pay a civil penalty of $2.23 million and WEX Bank to pay $1.75 million, separate from the Fed’s penalty, in addition to their restitution to students.

Customers Bancorp Inc., parent of Customers Bank, considered the actions that were expected to be taken against Higher One in performing due diligence on the purchase of the business from Higher One, Chief Financial Officer Robert Wahlman said in a phone interview. The company expects all known regulatory issues to be concluded prior to completing the transaction, he said, without commenting on the Fed’s potential action.

MB Financial Bank, which acquired Cole Taylor’s holding company last year, declined to comment, said the bank’s investor relations contact Berry Allen. WEX Bank officials did not immediately respond to requests for comment.

“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.