VENTURA, Calif. (CN) - A class action claims that a financial services company and its bank partner prey on college students by coercing them into handing over financial aid money and charging them exorbitant fees to access the funds.
Lead plaintiff Sherry McFall, a student at Ventura College, claims Higher One automatically creates bank accounts for unsuspecting college students, the collects deceptive and improperly disclosed bank fees when the students access their money. She sued both Higher One Holdings and The Bancorp Bank, in Ventura County Court.
"Higher One has arrangements with hundreds of colleges, including Ventura College, whereby a student's grant, scholarship and/or loan money is automatically deposited into a Higher One bank account without the authorization or consent of students. Colleges and universities, including Ventura College, send student mailing address and email address information to Higher One without receiving consent to do so," McFall says in her complaint.
Even before a student enrolls, "Higher One uses this information to begin sending marketing mail and email to students, encouraging them to use Higher One banking services for their financial aid refunds, which are a student's financial aid money (whether from grants, scholarships or loans) left over after the school deducts its tuition and fees," the student claims. (Parentheses in complaint.)
McFall says Higher One disclosed to investors its marketing strategy of extracting fees from students in its IPO prospectus in 2010:
"'Once we enter into a contract with a higher education institution, we begin focusing our marketing effort on the institution's students ...
"We work closely with our higher education institutional clients to communicate the benefits of our products and services through school-branded communications and literature in an effort to increase both the number of new OneAccounts and usage of existing OneAccounts ...
"Typically, we will send information to parents and incoming students soon after their admission applications are accepted by the school and during student orientation. We generally contact returning students before the beginning of a new semester and place signs in strategic campus locations such as bookstores, student centers, dining halls, athletic facilities and cash dispensers to increase awareness of our products and services ...
"In an effort to strengthen our relationships with students, we often sponsor and support on-campus events and create a co-branded website with the higher education institutions ...
"Our higher education institutional clients provide us with student email addresses that we commonly use to communicate with students about our products and services ...'"
McFall says the before the beginning of a term Higher One sends students an email stating that their college "'has partnered with Higher One to provide a new method for receiving financial aid disbursements to all ... students. It is called the [name of college] Debit Card. If you have received your Higher One card and are expecting financial aid, please activate the card and choose your disbursement preference right away to avoid any delays to your disbursement.'
"In such emails, and by use of the term 'partnered,' Higher One falsely implies to students that it is the college's preferred provider of banking services." (Brackets and ellipses in complaint.)
McFall claims that Higher One uses marketing channels to tell students they will get their financial aid refunds more quickly and "immediately" if they choose Higher One and that their financial aid disbursements will be "delayed" if they do not.