Students taking loans for college have to worry about accumulating interest, but they also need to watch out for fraudulent lenders.
Higher One Inc., a financial institution that specialized in student loans, was punished by federal regulators with $28.5 million in fines and restitution fees for deceptive practices and misleading actions, according to The Wall Street Journal.
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“The Federal Reserve ordered Higher One to give back to students $24 million in fees, and slapped it with a fine of $2.23 million. The Federal Deposit insurance Corp. separately levied a $2.23 million fine on Higher One and ordered it and WEX Bank to share the cost of returning $31 million to students,” Ryan Tracy wrote.
“Regulators said Higher One engaged in a variety of deceptive practices, including omitting information about how students could get their financial aid disbursements without signing up for a Higher One product called OneAccount and not telling students about the product’s fees,” Jason Lange and Sarah N. Lynch wrote for Reuters.
The company could then earn revenue by steering students into taking the debit card and associated fees instead of directly receiving the aid.
Higher One maintains that it has addressed those problems through “product and service changes” and “set new standards for transparency and compliance” in 2014.
“Deceptive marketing practices with respect to student loans will not be tolerated,” Federal Reserve Governor Lael Brainard said in a press release. “This action ensures that students who were misled into paying fees to access their financial aid funds will receive restitution for those fees.”
Higher One has a market cap of $158 million. The mandated refunds will reach about 570,000 students.
Another high-profile case of fraud in higher education in 2015 was the Consumer Financial Protection Bureau lawsuit against Corinthian College, a for-profit college chain that operated dozens of schools across multiple states. Federal regulators ordered the college to repay $531 million to students, alleging that Corinthian operated a “predatory lending scheme” and “fudg[ed]” statistics to make its placement rates look better.
