Higher One, the nation's leading campus debit card company, is in for another investigation for violating customers' rights.
According to the Huffington Post, the Federal Reserve Bank of Chicago opened the new probe to examine practices of a partnering bank involving student accounts. Higher One most recently settled out of a similar investigation from the Federal Deposit Insurance Corp. to the tune of $11 million.
In an annual report to the Securities and Exchange Commission, Higher One did not disclose the former partner, but said it was accused of "unfair or deceptive practices." Higher One is also facing more accusations including illegally stowing big chunks of students' federal student loans.
Cole Taylor, whose parent company is Taylor Capital Group, is the only partner Higher One disclosed that is also undergoing a federal investigation. Like the Aug. 2012 settlement with the FDIC, Higher One could be subject to restitution and payouts to affected parties.
Higher One could also easily lose traction in negotiations with the U.S. Education Department, who wants to lessen campus debit card companies' revenues. Being accused of intentionally incurring fees from students will likely take away their pull in those discussions.
The Consumer Financial Protection Bureau is one of many organizations that have also taken an interest in campus debit cards. The most common form of customer rights violations come in the form of easily avoidable fees that the debit card companies intentionally hide. For example, the accounts servicers like Higher One are charging with fees are the same accounts that hold students' federal financial aid.
"It's too early to assess the outcome as the review is ongoing," a Higher One spokeswoman, Shoba Lemoine, said in a statement to the HP. "But keep in mind Higher One has made dramatic consumer-friendly changes to our account offerings including improved consumer safeguards and fee structures (dropped more than half a dozen fees, for example). These changes have been recognized by the GAO and OIG reports on campus debit cards."
