WASHINGTON (AP) — Higher One Holdings Inc. is preparing to pay a fine to federal regulators investigating fees the company charged to college students who used its bank cards.
Higher One is near a deal with regulators that would end an 18-month investigation of overdraft fees charged between 2008 and 2011, according to two people with direct knowledge of the matter. The people spoke on condition of anonymity because the agreement is not final.
Higher One markets bank cards and checking accounts to college students through exclusive deals with colleges and universities. Students who use its accounts sometimes pay fees to access their financial aid money.
Higher One has card agreements with 520 campuses that enroll 4.3 million students, according to a recent study from the U.S. Public Interest Research Group Education Fund, a student advocacy group. Among the colleges that partner with Higher One are Liberty University, Miami Dade College, Texas Tech and Johns Hopkins University.
The company has been criticized by student and consumer groups, who say students are pressured into using its products because they receive pitches on university letterhead and believe the accounts are university-approved. They say students should be encouraged to shop around for a less expensive banking option.
Higher One said in a regulatory filing in May that it was working with the Federal Deposit Insurance Corp. to resolve the investigation. It said it already had finished refunding $4.7 million in fees as of March 31.
Regulators told Higher One in February 2011 that it might face an enforcement action because of violations relating to its compliance system, and its policy of charging overdraft fees on accounts that were "seriously delinquent," according to the May filing.
The company believed that any additional costs were unlikely, the filing said.
A representative for Higher One declined to comment on the matter. An FDIC spokesman also declined to comment, saying the FDIC only makes public actions against banks. Higher One partners with banks that hold customers deposits and issue cards on its behalf.
The FDIC typically oversees banks that hold deposits. It runs the insurance fund that guarantees people's bank deposits in case their bank fails.
The FDIC has authority over Higher One because of its close business relationships with banks that the FDIC regulates. During the period when the excess fees allegedly were charged, Higher One's cards were issued by The Bancorp Bank, which issues prepaid cards and holds deposits for non-bank financial companies.
___
Daniel Wagner can be reached at www.twitter.com/wagnerreports .
