Higher One, Inc. promises to help students reach their goal of achieving a degree by providing money management and refund services. But federal regulators say the company misled these students into paying improper fees, opening unneeded accounts through deceptive marketing tactics, and now it must pay $55 million in fines and restitution to harmed consumers. 

The Federal Reserve Board announced Wednesday that Connecticut-based Higher One must provide $24 million in refunds to students, and pay a penalty of $2.23 million. Higher One, and affiliated bank WEX, must also pay an additional $31 million in refunds to students and $2.23 million in penalties under a settlement with the Federal Deposit Insurance Company (FDIC) for a number of deceptive, harmful practices.

Higher One provides colleges and universities with financial aid disbursement services for students. Specifically, after payment of tuition and other expenses owed directly to the school, the remaining financial aid — money for books, supplies, and living expenses — can be disbursed to students through Higher One’s “OneAccount.”

The company allegedly failed to tell students they could obtain their financial aid disbursements without opening a OneAccount with Higher One. The company also failed to disclose fees, features, and limitations of the accounts prior to requiring students to make a selection regarding the method of disbursement.

Additionally, the company failed to provide information about the locations of ATMs where students could access their disbursements without cost, and used the prominent display of a school logo, giving the impression the institution endorsed the OneAccount product.

“Deceptive marketing practices with respect to student loans will not be tolerated,” Federal Reserve Governor Lael Brainard said in a statement. “This action ensures that students who were misled into paying fees to access their financial aid funds will receive restitution for those fees.”

Under the Federal Reserve’s restitution plan, nearly 570,000 students who opened a OneAccount with Higher One through Cole Taylor Bank of Chicago, or Customers Bank of Phoenixville, PA, between May 4, 2012 and Dec. 19, 2013 will be reimbursed for fees related to the company’s deceptive practices.

The company must also pay a civil penalty of $2.23 million to the Federal Reserve and a fine of $2.23 million to the FDIC.

“Higher One deceived students at nearly every step of the process so the company could pad its bottom line. Today’s enforcement action has put the nail in the coffin of their broken business model,” says Rohit Chopra, Senior Fellow at the Center for American Progress, and formerly the Student Loan Ombudsman at the Consumer Financial Protection Bureau. “Schools should think twice before partnering with companies that recklessly violate the rights of their students.”

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