U.S. Sen. Sherrod Brown of Ohio Asks Higher One to Improve University Banking Deals

September 13, 2012 | 5:00 AM

By Ida Lieszkovszky

Brendan Hoffman / Getty Images

U.S. Sen. Sherrod Brown of Ohio sent Higher One a letter asking them to revisit the deals they've made with higher education institutions.

Many universities have contracts with banking institutions to handle financial aid disbursements or to link students’ school IDs to debit accounts. Some, like the U.S. Public Interest Research Group, have criticized these contracts for duping students into ominous banking relationships riddled with fees. Universities defend the deals, saying they make financial transactions easier for both the university and students.

Now, U.S. Sen. Sherrod Brown of Ohio is taking a side – against the banks. In a call today with reporters, he shared what he calls a public service announcement for students to be wary of banks endorsed by their university.

“Too many students have been slammed with hidden fees and penalties that cut into their already-limited financial aid dollars,” Brown told reporters. “That’s why I’m fighting for the reforms we made on credit cards to apply to debit cards, particularly those storing student financial aid. Students shouldn’t have to watch their federal aid dollars go to debit card companies.”

Brown hasn’t taken any legislative action – yet. He says he hopes it doesn’t get that bad. But he did say if things don’t improve, he’d get in touch with Richard Cordray, director of the Consumer Financial Protection Bureau – and Ohio’s former attorney general.

In the meantime, Brown sent a nasty gram to Higher One, which has contracts with seven universities in Ohio.

“Federal student aid programs should help students prepare for the future, not extract fee income from them,” Brown wrote in the letter to Dean Hatton, Higher One’s former president and a current member of its Board of Directors. “In anticipation of schools disbursing financial aid checks this week and next, I urge you to revisit your companies’ federal financial aid debit card policies to ensure that they are consumer-friendly and consistent with reforms that Congress enacted for the credit card market.”

You can read Brown’s entire letter below, or check out our compilation of university banking contracts here.

September 12, 2012

Mr. Dean Hatton

President and Chief Executive Officer

Higher One, Inc.

115 Munson Street

New Haven, CT 06511

Dear Mr. Hatton:

Increasingly, attention has been drawn to the services provided by companies that issue debit cards in order to store college students’ federal financial aid. Simply put, federal student aid programs should help students prepare for the future, not extract fee income from them. In anticipation of schools disbursing financial aid checks this week and next, I urge you to revisit your companies’ federal financial aid debit card policies to ensure that they are consumer-friendly and consistent with reforms that Congress enacted for the credit card market.

In 2009, Congress passed the bipartisan Credit CARD Act, to address the most egregious anti-consumer practices in the credit card market. Unfortunately, these reforms do not apply to other payment cards. While the Department of Education imposes some requirements on financial aid disbursement accounts, I urge your company to go beyond those requirements and implement reforms similar to those provided in the CARD Act. Specifically, I urge you to adopt the following best practices:

·         Improving fees and disclosures, including: restrictions on over-the-limit fees; requirements that penalty fees be reasonable; and a prohibition against inactivity fees;

·         Restricting the use of tangible gifts to college students on or near campus, or at campus-sponsored events, in exchange for using debit card services;

·         Publicly disclosing all contracts between banks, firms, and schools, as six of my colleagues and I have urged higher education associations to do; and

·         Submit an annual report to the Consumer Financial Protection Bureau and Department of Education including the terms and conditions of all promotional agreements with colleges, including the number of student debit card accounts opened during the time period.

In these tight fiscal times, our nation cannot afford to waste federal student aid dollars on excessive fees. While debit cards can clearly offer benefits to students, the associated costs must be reasonable and transparent. That is why I am urging you to implement these commonsense reforms. Thank you for your attention to this important matter. As Chairman of the Senate Banking Subcommittee on Financial Institutions and Consumer Protection, I look forward to further exploring the issue of student debit cards with you.

Sincerely,

Sherrod Brown

United States Senator

Note: An earlier version of this story identified Dean Hatton as the president and C.E.O. of Higher One. Hatton recently retired from that position.

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http://www.facebook.com/seanpglass Sean Glass

Full Disclosure – I am a founder of Higher One. I am no longer involved with the company other than being a shareholder. My views below only represent my personal opinion. I have not written or commented on articles before, but have gotten sick of the misleading and inaccurate information being used to attack a company which I helped build and know well.

These sorts of attacks on Higher One are unfounded and based on misleading information. My guess is that it’s been driven by fear mongering by higher one’s large company competitors who hope to paint the company as evil so that they can try to gain a foothold in this market. Who are these companies? Huge politically connect companies like Sallie Mae and US Bank come to mind.

1. Higher One is the only company that actually shows a student a fee schedule before they are able to open an account. A student has to acknowledge the fee schedule which clearly shows what fees there are, when they might be incurred, and how to avoid them. SURPRISE – there are no “HIDDEN” fees. Any potential fees are disclosed clearly up front

2. Higher One is continuing to develop better and cheaper options for students. It recently announced a product which it will be offering to students which has only 1 fee. That’s it. The problem with US consumer finance products- both stored value and checking accounts – is that there is value to marketing accounts as “FREE” that although they have no monthly fee and could be free, have a list of fees associated with them. Of course, these accounts aren’t actually free. It costs the company who offers them money to provide the service, and inevitably, there is cost when customers use some of the fee services. What Higher One is doing which is super innovative is to say “Look – for students we want to provide a valuable service – a checking account with debit card, online banking, mobile banking, etc.” and make it clear what we would like to get paid for it. One fee per month. That’s it. A company that is evil and not trying to work in the best interest of it’s customers would never develop a product like this.

3. Apologies Senator, but if you are even up to date on the company and it’s practices, you would know that Dean Hatton is not currently the CEO of the company, nor it’s president. Maybe Sallie Mae’s lobbyist forgot to tell you that. He hasn’t been CEO for months. Maybe this means that some of your other information isn’t accurate? If your staff or the lobbyists from Sallie Mae, US Bank, or other big company competitors aren’t even giving you the correct name of the CEO, what other misinformation are they feeding you.

4. Higher One’s products have always been priced below comparable products from large banks. The hysterical cry of “they screw students with hidden fees” makes great headlines, but even the director of the misleadingly named Public Interest Research Group, admitted when pushed by a good reporter that ““It could actually be that Higher One’s checking account compared to other checking accounts might be a good option, but that’s not what students need,” It could actually be? SORRY MR. PIRG? Shoudn’t you know? Wait – you do know. Higher One’s account’s have been much cheaper than other banks checking accounts. How much cheaper?

The financial services firm Bretton Woods, which compared the “median cost to students of using prepaid cards, regional and national checking accounts, paper checks and the OneAccount.” The report showed Higher One’s $49 far below the other averages: $240 to $464 for “national bank offerings,” $184 to $429 for “regional bank offerings,” and $98 to $239 for prepaid cards.

And what do students need? Because they’re a student they shouldn’t have the ability to have a checking account? What are they supposed to do? Stick their money under a mattress?

I know that it’s easy political fodder to say that you’ve found a company that is screwing students and you’re going to do something about it. Even easier when that is fed to you by the mouths of special interest lobbyists from big companies like Sallie Mae, US Bank, PNC, and others.

Isn’t it more important that

1. Higher One is an entrepreneurial company that lowers costs for colleges and universities saving tax payers money? It was founded by students, is beloved by its customers, and is creating lots of new jobs as it grows.
2. Higher One’s checking account options for students (and they are options) are cheaper and more feature rich than either pre-paid cards or checking accounts from national or regional banks.
3. Higher One continues to innovate – Their announced Edge account will be truly unique in the marketplace. A checking account which is super easy to understand how much it costs and what it gives you as it only has 1 fee.

I know that it’s easy for someone to write an article focused on shock and awe with the claim that companies (“BANKS”) are screwing students in some scammy way. Vague references and talk of “hidden” fees make good headlines and political headlines. But they’re not based on fact and in the process something that provides value to students, universities, and tax payers is being attacked unfairly. Find out the real facts – not

sfcc student

You miss the point. I HAVE an account. I do t WANT or NEED another. I want to go get my check on day one of class and put it in the bank or cash it as I decide. Not to be forced into either taking a fee laden debit card or waiting until you get around to transferring my money and charging me to do so.
Brent Hunsberger

Sean,

Why did Higher One arrange contracts that incented colleges to push students to run their card “swipe-and-sign” (credit) instead of as a more cost-efficient “debit” transaction?

http://blog.oregonlive.com/finance/2010/09/higher_one_debit_card_fees_at.html

“Higher One also offers the schools incentives to push swipe-and-sign.
It gives each school a cut of the higher credit swipe fee — about 10
cents per $100, according to the contracts. It also rewards them based
on how much students deposit into Higher One’s bank accounts.
These fees obviously sustain Higher One. Last year, it took in $66 million on merchant swipe fees, ATM fees,
overdraft fees and student “convenience fees,” the company says. It did
so well last year, the company handed out $1 million in bonuses to
employees. ”

Why not just have students run the “debit” card as a debit card without a penalty for doing so? That was immensely confusing and frustrating to students. Frankly, it borders on deceptive. It’s not a great lesson to be teaching college students regarding finances.

Also, have your alma matters (Yale and U of Penn) adopt Higher One? Why or why not?

GLENN H GREENBERG

hOW DID THE SENATOR GET THROUGH YALE WITH THIS KIND OF SHODDY FACT CHECKING AND ZERO CRITICAL THINKING? AS WILL ROGERS SAID, WHEN CONGRESS JOKES THEY MAKE IT A LAW, AND WHEN THEY MAKE A LAW IT IS A JOKE.

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