Higher One Holdings Inc, a company that distributes residual financial aid to students across the nation, is preparing itself to pay a fine to federal regulators investigating the fees that it charged to college students who used its bank cards.
The company which is based in New Haven, Connecticut, markets bank cards and checking accounts to college students through exclusive deals with colleges and universities.
Currently, it has card agreements with 520 campuses that enroll more than 4.3 million students across the nation, according to a recent study by the U.S. Public Interest Research Group Education Fund, a student advocacy group. A MasterCard debit card called the OneCard, which is connected to an online bank account, holds the student's residual financial aid money. Student financial aid lenders distribute funds to schools, who in turn deduct tuition, fees, and textbook costs. It is the responsibility of the schools to then distribute the funds to each student. But, many schools enter into a contract with Higher One to alleviate the cost and labor associated with this task, so that they can pocket a share of the fees that Higher One charges their students.
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Hence, the investigation was launched to probe into the fees.
If Higher One enters a deal with the federal regulators, it would end an 18-month investigation of overdraft fees charged between 2008 and 2011. The details regarding the amount of fine charged are still hazy as the agreement hasn't been signed yet, reported NewsOk.
The company has been extensively criticized by student and consumer groups, who say students are pressured into using its products because they receive pitches on university letterheads and believe the accounts are university-approved. They say students should be encouraged to shop around for a less expensive option.
Higher One accounts carry more than a dozen fees, including $50 if an account is overdrawn for more than 45 days, $10 per month if the student stops using his account for six months, $29 to $38 for overdrawing an account with a recurring bill payment and 50 cents to use a PIN instead of a signature system at a retail store.