Higher One, a financial services company in New Haven, Conn., has agreed to pay $11 million in restitution to 60,000 students in connection with alleged unfair and deceptive practices in its student debit card account program.
The agreement is part of a settlement between Higher One and the Federal Deposit Insurance Corp., or FDIC.
According to an FDIC statement, the bank regulator found that Higher One and Wilmington, Del.-based The Bancorp Bank, which issued the debit cards, were:
- Charging student account holders multiple nonsufficient fund fees for a single merchant transaction.
- Allowing accounts to remain in overdrawn status for long periods of time, allowing nonsufficient fund fees to continue accruing.
- Collecting nonsufficient fund fees from subsequent deposits, typically funds for tuition and other college expenses, to the students' accounts.
The FDIC said restitution would be made to debit card account holders who incurred certain nonsufficient fund fees beginning July 16, 2008, until such time as Higher One stopped charging those fees. Restitution can be in the form of credits to current account holders and charged-off accounts or by check if the account is closed, to the extent that the credit is more than any amount Higher One charged off on the account, the FDIC said.
In a separate statement, Higher One said account holders were credited in December 2011.
The agreement also requires Higher One to change the way it imposes nonsufficient fund fees, refrain from making misleading or deceptive representations or omissions in its marketing materials or disclosures, and institute a sound compliance management system.
Neither Higher One nor The Bancorp Bank admitted or denied any liability. Higher One said it believed the "relatively low civil money penalty" reflected its serious commitment to its customers, severity of the issue and the company's cooperation with the FDIC.
The FDIC also imposed civil monetary penalties of $110,000 for Higher One and $172,000 for The Bancorp Bank.
Higher One specializes in financial services offered to students through colleges and universities.
The Bancorp Bank is a subsidiary of The Bancorp, a financial holding company that offers direct and private-label affinity financial services and products.
Follow me on Twitter: @marciegeff