A former student at a community college has filed a proposed class action lawsuit against student card provider Higher One Holdings Inc. as well as WEX Bank and Customers Bancorp alleging that the companies placed student financial aid disbursements into accounts that were subject to high fees, deceptive practices and that did not maintain adequate numbers of fee-free ATMs to allow students to access their funds.
The suit, filed on April 13, seeks certification for a national class of former Higher One account holders. Among other things, the complaint alleges that High One failed to disclose applicable fees associated with the card account and engaged in the “deceptive” practice of sending students an account access device co-branded with their university, which, according to the complaint, gave the impression that the student’s receipt of financial aid would be delayed if they chose to receive it via another bank. Notably, the complaint also highlights previous enforcement actions taken against Higher One in relation to its student cards by the FDIC, underscoring the additional risks to companies that enforcement proceedings conducted by their federal regulators can lead to class action lawsuits.
Student cards have come under increasing scrutiny in recent years with charges that providers were taking advantage of students who had little to no experience with financial services products. In response to these complaints, the Department of Education, in 2015, issued final rules imposing new requirements on universities seeking to partner with financial services providers to offer student cards for financial aid disbursement. The DOE is currently accepting comments related to disclosures on such accounts through June 9, 2017.
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- FDIC Fines Two Firms over Card-Based Financial Aid Disbursement
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