Higher One Embraces Banking Transparency After Slap From FDIC

Following a settlement over deceptive fees charged to students, Higher One moves to Pew standards for transparency with checking accounts.
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Higher One, a financial institution that has contracts with over 800 colleges and universities around the U.S., will have to pay more than $11 million to resolve claims that it deceptively charged students fees, the FDIC recently announced.

The FDIC found that Higher One committed multiple violations, including charging multiple overdraft fees on single transactions, allowing accounts to remain overdrawn to generate more fees, and covered fee balances by siphoning students’ tuition payments.

Higher One will have to distribute the $11 million settlement to some 60,000 students. It will also pay a penalty of $110,000. Its banking partner, The Bancorp Bank, was also assessed a $172,000 penalty.

Going forward, Higher One is ordered to stop charging fees on accounts with negative balances for more than 60 days, stop charging more than three overdraft fees per day, and not charge multiple overdraft fees on a single transaction.

The Pendulum Swings from Deceptive Fees to Transparency

As a result of the FDIC settlement, Higher One is implementing a new disclosure policy for its three checking accounts offered through its bank partners. The approach is based on recommendations by Pew Charitable Trust  Pew’s project “Safe Checking in the Electronic Age,” which calls for financial institutions to standardize and simplify their disclosure form. The goal? To make checking account terms and fees more transparent and simpler for consumers to understand.

“What we are hearing is the increased need for simplicity and value in banking and that is our direction,” said Higher One President and COO Miles Lasater. “We are continuing to build our services, powered by feedback.”

Translation: “We got busted. Now we’re gonna try flipping to the good side, mostly because that’s what we promised to do as part of our settlement with the FDIC.”

Standardized Transparency for Checking Disclosures

Higher One is working to develop the Pew-recommended fee-schedule form for all three of its accounts, which allows consumers to compare bank accounts across the market more easily to see which option they feel may be the best choice for them.

As a part of its new commitment to transparency, Higher One is instituting the following with respect to all three of its checking accounts:

Elimination of “Lack of Documentation” Fees – Higher One has eliminated the Lack of Documentation Fee on all accounts, a fee charged to less than 2% of OneAccount holders when each did not provide adequate documentation as required by the USA Patriot Act.

Elimination of PIN-based Fees – Higher One has now eliminated PIN-based fees from two of the three OneAccount options available to students at the time of choosing the delivery method for their refund—FLEX and Premier. As always, with all three accounts, accountholders can swipe and sign at the point-of-sale free of charge anywhere where MasterCard is accepted.

No Overdraft Protection or Credit Line – Higher One does not offer overdraft protection on any accounts. This is a form of credit and Higher One has never issued any lines of credit to customers.

ATM Commitment – All Higher One account users can conduct balance inquiries and withdrawals for free at any Higher One ATM. Higher One has installed more than 700 ATMs nationally. Should a campus’ Higher One ATMs not be operational due to any maintenance or repair related issues or be out of cash at any time, Higher One reimburses OneAccount holders at their request for up to $5 per day for fees charged at other ATMs. FLEX and Premier account users are allowed a specified number of out-of-network ATM transactions per month.

Higher One provides its services to approximately 6.2 million students at distinguished public and private higher education institutions nationwide. Higher One’s popular OneAccount has no monthly fees and no minimum balance requirement. A head-to-head comparison with national and regional banks names Higher One’s OneAccount as “one of the lowest cost alternatives” for students. All Higher One checking accounts are FDIC insured and are open to students, regardless of financial or credit history.

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