Higher One, a financial institution heavily focused on refund management for financial aid, claims: “What makes us different at Higher One is our singular focus on education and a commitment to open communication, transparency and choice.”
Why shouldn’t an 18-year-old college student believe them? Higher One’s “About Us” page is filled with logos of prestigious looking awards from companies and media outlets like Deloitte, Ernst & Young and Fortune. Testimonials throughout the site – notably from administrators instead of college students – tout the simplicity of the Higher One experience.
Colleges can use Higher One to distribute financial aid refunds to students, instead of cutting paper checks to individuals. Pretty flow carts on their site make it all seem just so easy, and Higher One says the refunds are distributed based on student preferences.
Hop over to the “In the news” section, and the company highlights their work in the field of financial literacy. But there are some glaring omissions of Higher One in the news:
FDIC Announces Settlements With Higher One, Inc., New Haven, Connecticut, and the Bancorp Bank, Wilmington, Delaware for Unfair and Deceptive Practices – FDIC
In 2012, Higher One and The Bancorp Bank, Wilmington, Delaware, reached a settlement to pay out $11 million in restitution to approximately 60,000 students for the financial institutions’ unfair and deceptive practices. One of those charges was allegedly strong-arming students into signing up for bank accounts with a Higher One partner bank instead of a financial institution of the student’s choosing.
According to the FDIC’s press release on the issue, those practices also included:
- Charging student account holders multiple non-sufficient fund (NSF) fees from a single merchant transaction
- Allowing these accounts to remain in overdrawn status over long periods of time, which then racked up more NSF fees
- Collecting the fees from subsequent deposits to the students’ accounts
In 2012, the Higher One attempted to pacify concerns by changing their practices pertaining to overdraft charges and removing misleading wording in their marketing materials. Or simply put, that’s why they have “dedication to transparency” stated on the “About Us” page.
Merely two years later and Higher One is back under investigation and bringing Chicago-based bank, Cole Taylor, with them.
Higher One, Top Campus Debit Card Provider, Faces Investigation – Huffington Post
Five months before Higher One’s first tussle with the FDIC, Cole Taylor signed a five-year contract to handle deposits from college students working with the financial aid refund company. The partnership only lasted until February of 2013.
Why would Cole Taylor want to work with Higher One?
For all those deposits of course!
Higher One is not a bank, so they need a bank partnership in order to get FDIC protection (or insurance). A bank will happily take all those deposits Higher One sends over, especially because Higher One handles the customer service, processing and administration of the accounts.
In the case of Cole Taylor, the bank saw a massive uptick in deposits by partnering with Higher One. In the Taylor Capital Group 2012 annual report, the company disclosed just how much of an increase they saw from college students being directed to their bank.
“Average noninterest-bearing deposit balances during 2012 increased $346.8 million, or 53.3%, to $997.5 million, compared to $650.7 million during 2011. The increase in noninterest-bearing deposits was largely due to an increase in consumer checking accounts resulting from a new relationship with an organization that provides electronic financial aid disbursements and payment services to the higher education industry.”
How does Higher One nickel-and-dime college students?
For a company dedicated to the “mission of student success”, they certainly make it difficult for students already in debt to easily access their money without incurring fees.
For example, Higher One charges a fee of fifty cents for using a bankcard as a debit card instead of as a credit card. If a student wanted to get cash back at a store, they’d be charged $.50 which is certainly much cheaper than the upwards of $4.50 to use a non-Higher One ATM. But it’s still fifty cents more than plenty of bank-offered debit cards.
Webster University, a Higher One client, informs their students about ways to avoid fees on the University’s website, even advising students to use their cards as credit rather than debit to avoid fees.
The full list of fees are detailed on the school’s website and include $2.50 charge at non-Higher One ATMs on top of whatever the ATM owner charges, $.50 per debit card transaction, $21 fee to replace a card and $29 overdraft charge on the first violation with $38 for subsequent overdraft charges.
What’s happening to Cole Taylor and Higher One?
Both institutions are under investigation from the Federal Reserve Bank of Chicago, even though Cole Taylor severed their ties with Higher One relatively quickly after Higher One’s first deceptive practices investigation. The Federal Reserve Bank of Chicago already determined Cole Taylor “engaged in a deceptive practice relating to the checking account opening process.”
Cole Taylor will likely have to pay penalties for engaging in unlawful financial practices and possibly pay restitution to the college students impacted by their behaviors.
According to the ruling from the Federal Reserve, the Cole Taylor has stated that Higher One is contractually obligated to reimburse them for any restitution that would need to be made, which could cause a loan default for Higher One.
Higher One is currently in business with WEX Bank, headquartered in Utah, and mentioned in the fine print on Higher One’s new website, MyOneMoney.com. It’s almost as if they’re deliberately trying to split away from their original branding. Outrage towards both Higher One and WEX Bank can be found scattered around various chat rooms, message boards, student advocacy websites and notably – Yelp.
In time, we’ll learn exactly how much Cole Taylor and Higher One will need to pay the victims of their scheming. But for now, we see an example of how a business “created by students, for students” can fall so far from their original mission after being seduced by the almighty dollar.