One month after renewing a contract with Webster University, Higher One, Inc. — the company responsible for all Pell Grant and student loan disbursement at Webster — found itself in trouble.
In August, the Federal Deposit Insurance Corporation (FDIC) ruled Higher One violated Chapter Five of the Federal Trade Commissions Act. This ensures unfair or deceptive acts are illegal in commerce. The FDIC found Higher One had continuously charged non-sufficient fund fees on overdrawn student accounts. Higher One charged these fees to subsequent deposits in the account — deposits typically meant for university expenses.
The FDIC ordered Higher One to refund these fees — totaling more than $11 million — to more than 60,000 students. According to The Wall Street Journal, Higher One has accounts with 2.1 million college students.
The ruling also mandated Higher One stop charging non-sufficient fund fees to accounts that have a negative balance for more than 60 days. Greg Gunderson, vice president and chief financial officer, said he was unaware of any Webster students affected by this ruling.
“We’ve had instances where students have had issues with their accounts, and when I’ve called Higher One, they’ve been taken care of,” Gunderson said. “In my experience they’ve been very responsive to student needs.”
Higher One discontinued other fees, including charging students for debit card transactions, which required them to use a PIN.
Effective July 1, 2012, Webster committed to five years of service from Higher One. Gunderson said a request for proposal (RFP) was sent to vendors last year. The proposal outlined what the university desired in a financial aid disbursement program. A selection committee reviewed responses to the RFP, interviewed firms and reached a majority consensus on Higher One.
Gunderson said Webster selected Higher One because of a recent change in its practices. In past years, incoming freshmen would receive a letter from Higher One along with a Higher One debit card. The letter would ask freshmen to decide how all future financial aid refunds should be delivered to them. These included paper check, direct deposit into a separate bank account or into the Higher One debit card account.
Because of the card’s presence with the letter, Gunderson said students would falsely believe the debit card was their default option. Student Government Association (SGA) President Michael Grosch agreed.
“I remember getting one when I transferred, and they were really pushing for the card,” Grosch said. “I remember reading the letter and thinking, ‘Oh, this is gonna give me my money back, so I have to sign up for this.’ The funny thing is, they never used my card.”
Now, students receive a letter without the card asking them to select one of the three delivery methods.
“We’ve always had all the flexibility, but this is designed to highlight that flexibility,” Gunderson said.
The agreement with Higher One also required the company to install multiple ATMs on campus. Gunderson said an ATM in the University Center, provided by US Bank, was removed earlier this year due to low usage.
The selection committee considered banks as possible financial aid disbursement vendors. However, Gunderson said banks are relatively new to the financial aid disbursement industry.
“(Banks) did not always bring the full experience to the table, and they seem to be more focused on developing a banking relationship with the student,” Gunderson said. “That was their primary objective, which is admirable, but our main objective is to have a process that seamlessly transfers funds to students as quickly as possible.”