PHILADELPHIA (CN) – Saying that federal sanctions failed to change its unscrupulous practices, a Pennsylvania woman slapped Higher One Holdings with a federal class action over the fees it charges on student debit cards.
Higher One is not a bank, but the April 13 complaint notes that the organization has arrangements with colleges across the country to store any unused financial aid that the schools must refund to students.
Though students can opt out of using so-called OneAccounts, most don’t.
Lead plaintiff Shaya Edelman says she was one of the 80 percent of vulnerable students whom Higher One plied into opening a co-branded debit card. Though the account gave her immediate access to her funds, Edelman says she faced “unconscionable and unusual bank fees” as a result. Other options like direct deposit and paper check would take up to one week and 21 days to clear, respectively.
“Based on information and belief, the fees assessed to plaintiff Edelman are representative of millions of dollars of fees that defendants wrongfully assessed and deducted from student customers’ accounts,” the complaint states.
A resident of King of Prussia, Edelman says Higher One and its banking partners have been under fire by financial industry authorities for years.
The complaint describes a $15 million settlement that Higher One reached with two others in 2014, compensating students who opened accounts between 2006 and 2012. Higher One committed another $31 million in restitution the following year, Edelman notes, as part of a consent order after the Federal Deposit Insurance Commission nailed it for misleading students enrolled in OneAccounts.
Also in December 2015, according to the complaint, Higher One faced a cease-and-desist order and $24 million penalty from the Federal Reserve.
“Despite the penalties it had received, and its promises to change its behavior, Higher One continued to profit from deceptive practices and improper fees,” the complaint states.
Edelman signed up for a Mustang Card while enrolled at Montgomery County Community College.
“Targeting students with excessive bank fees – and using scarce financial aid funds (much of which is taxpayer money) to pay those fees – is unethical, contrary to public policy, and makes it more difficult for students to avoid crippling debt.”
Edelman says the unconscionable bank fees that Higher One charges are “often at 7 percent interest or higher.”
These kinds of fees “are rarely, if ever, charged by other banks” with similar checking services.
“Many students receiving grant and financial aid are low-income, with a disproportionately higher level of need than the general student body,” the complaint continues.
Edelman seeks punitive damages and rescission, alleging unjust enrichment, conversion and violation of Pennsylvania consumer-protection law. She is represented by Charles Schaffer with Levin, Sedran & Berman.
In addition to Higher One, the class action names as a defendant its banking partner WEX Bank and Customers Bancorp, which Edelman says acquired the OneAccounts business last year.
The defendants did not return a request for comment.