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Another abusive practice, targeting students; are higher education institutions “partners” or “pushers”?

Yet another example of banks doing what they do best: targeting segments of the population that can be more easily tricked and trapped by unfair practices.  According to an August 8, 2012 FDIC press release (partially titled “Unfair and Deceptive Practices”):

“Among other things, the FDIC found that Higher One and The Bancorp Bank were: charging student account holders multiple nonsufficient fund (NSF) fees from a single merchant transaction; allowing these accounts to remain in overdrawn status over long periods of time, thus allowing NSF fees to continue accruing; and collecting the fees from subsequent deposits to the students’ accounts, typically funds for tuition and other college expenses.”

In a Bloomberg article, attribution was given to Mark Volchek, Higher One’s chief executive officer for saying the company “is fixing its practices as required in the settlement and has credited affected account holders.”  Isn’t that nice?  After a legal/regulatory action, forcing the company to give students their money (e.g., tuition refunds) back, Higher One is going to issue “restitution” to the approximately 60,000 students (FDIC) it was willing to trap in a circular pattern of being overdrawn, in which they continued “racking up fees” (Bloomberg).

One detail in the list of changes that are to be made on the part of Higher One’s practices stood out, to me: “[Higher One is required to] not charge more than three NSF fees on any single day to a single account.”  So, one merchant transaction leads to three NSF charges, a day…is that what they were doing?

In my role as an educator, I think I have developed a greater appreciation than I ever did in the past (before becoming an educator) for some of the challenges faced by academic institutions.  Nevertheless, I do assert that banks are very good at dreaming up new ways to engage in fleecing people, and the debit card phenomenon is one of them.  Debit cards have been sold to government officials, administrators and others in the public sector as a convenience.  But at what cost?  Students may have gotten their deposits faster (that’s a questionable claim–is an account holder really able to draw against deposits before those deposits have actually cleared?), however, they also had their money unfairly taken from them faster, and repeatedly, too.

From a search engine results page, I spent a few minutes perusing a few of the web pages that served as a partial inspiration for the title of this post; “partners” or “pushers”:

HACC has partnered with Higher One

Kentucky Community & Technical College System (KCTCS) proclaims “Smart Money Starts Here!” and promotes a $50.00 (MasterCard) gift card (link on bottom left):

KCTCS Higher One account landing page screenshot

Simplify Your Life With The Valencia Debit Card

University of Montana: “services that provide the ultimate convenience and ease of use

Last I heard, statements like those above are called “benefit appeals” in marketing.  I suppose that if I had the time to drill down, I could assemble an exhaustive list of Higher One’s university clients (sounds like a good project for a member of the media: RESEARCH YOUR STORIES!).  According to this article, “Higher One holds card agreements with 830 campuses nationally that enroll 6.2 million students, according to testimony at a May Department of Education hearing by Higher One attorney Robert Barbieri.”  This is an excellent backgrounder on the larger issues surrounding campus debit card programs.

One remark about the PR “spin.”  You’ve gotta love it.  Volchek was also quoted by Bloomberg to suggest that the “relatively low civil money penalty imposed reflects how seriously we take our commitment to our customers.”  Since when have banks and their executives individually suffered large penalties or at all for engaging in their abusive practices?  Most settlements appear to me to be: “You got caught.  You have to stop doing that and give back what you took.”

Has anyone gone to jail over the mortgage meltdown?  At least according to this article in American Banker, nope, and it’s “unlikely” (that anyone will).  Apparently, as an executive it’s okay to create a culture of greed, corruption, fraud and abuse, as long as one does not personally fill out the paperwork that is associated with immoral or illegal behavior (executed by underlings).

So much for Higher One’s, “we must not be that guilty, look at the small fine,” excuse.

And, yes, even though I manage to make ends meet, it sure as heck isn’t getting any easier.  I still carry my own student loan (a big one that’s been a “ball and chain” around my neck, for years).  I have no appreciation whatsoever for those who profiteer on the backs of those of us who are trying to better ourselves and the world around us by seeking to educate or become better educated.  Therefore, in my opinion, Higher One’s actions are not a new low for the banking industry as a whole, but they have certainly been loathsome.

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