Board of Governors of the Federal Reserve System

The Federal Reserve Board on Wednesday assessed a civil money penalty and issued a consent order to cease and desist against Higher One, Inc. of New Haven, Connecticut (Higher One). The order addresses deceptive practices by Higher One that misled students who obtained financial aid disbursements from institutions of higher education through Higher One. The practices employed by Higher One were misleading under section 5 of the Federal Trade Commission Act (FTC Act) and included:

• The omission of material information about how students could get their financial aid disbursement without having to open a OneAccount with Higher One
• The omission of material information about the fees, features, and limitations of Higher One's OneAccount product prior to requiring students to make a selection regarding the method for financial aid disbursement
• The omission of material information about the locations of automated teller machine (ATMs) where students could access their financial aid disbursements without cost and the hours of availability of those ATMs
• The prominent display of the school logo, suggesting that the school endorsed the OneAccount product

The consent Order requires Higher One to:

• Provide restitution of approximately $24 million in fees to approximately 570,000 students who opened accounts with Higher One while Higher One's website and marketing materials were deceptive
• Pay a civil money penalty of $2,231,250
• Adopt a consumer compliance risk-management program
• Refrain from any future violations of section 5 of the FTC Act

"Deceptive marketing practices with respect to student loans will not be tolerated," said Federal Reserve Governor Lael Brainard. "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 Restitution Plan ordered by the Board, students who opened a OneAccount with Higher One at Cole Taylor Bank of Chicago, Illinois or Customers Bank of Phoenixville, Pennsylvania, between May 4, 2012, the date the deceptive marketing practices involving the OneAccount began, through December 19, 2013, the date Higher One took corrective measures, will be reimbursed for the fees related to the deceptive practices. Consumers are not required to take any action to receive restitution. If the consumers have an open OneAccount, they will receive a credit to their account. For closed accounts, a check will be sent to the affected consumers.

From May 2012 through August 2013, Higher One offered the OneAccount through Cole Taylor Bank. In June 2014, the Board took an enforcement action against Cole Taylor Bank, including a civil money penalty. An action is being pursued against Customers Bank, the state member bank that has held OneAccounts since August 2013.

The Federal Reserve Board is taking this action in coordination with the Federal Deposit Insurance Corporation, which is separately addressing Higher One's deceptive practices related to OneAccounts offered through a state nonmember bank.

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