Exhibit 10.1

UNITED STATES OF AMERICA
BEFORE THE
BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM
WASHINGTON, D.C.
 

       
In the Matter of:
 
Docket Nos.
15-027-B-SM
15-027-CMP-SM
     
CUSTOMERS BANK
 
Order to Cease and Desist and Order of Assessment of a Civil Money Penalty
Issued Upon Consent Pursuant to the Federal Deposit Insurance Act, As Amended
Phoenixville, Pennsylvania
 
A State Member Bank
 
 
 
 
 
 
 
 
 
 
 

 

WHEREAS, in recognition of the common goals of the Board of Governors of the
Federal Reserve System ("Board of Governors") and Customers Bank, Phoenixville,
Pennsylvania ("the Bank"), a state-chartered member of the Federal Reserve
System, to ensure compliance by the Bank with all applicable federal and state
laws, rules, and regulations including, but not limited to, section 5(a)(1) of
the Federal Trade Commission Act ("FTC Act") (15 U.S.C. § 45(a)(1)), and
effective management of the legal, reputational, and compliance risks of the
Bank, the Board of Governors and the Bank have mutually agreed to enter into
this combined Order to Cease and Desist and Order of Assessment of a Civil Money
Penalty Issued Upon Consent (the "Order");
 
WHEREAS, in its capacity as an agent of the Bank, Higher One, Incorporated, New
Haven, Connecticut ("Higher One") became an institution-affiliated party, as
defined in sections 3(u) and 8(b)(3) of the Federal Deposit Insurance Act, as
amended (the "FDI Act") (12 U.S.C. §§ 1813(u) and 1818(b)(3)), as of July 12,
2013;

WHEREAS, at all times relevant to this Order, Higher One provided financial aid
and reimbursement services to colleges and universities (collectively the
"Schools") and demand deposit account services to students and former students
throughout the United States through relationships established by entering into
Deposit Processing Services Agreements ("Agreement" or "Agreements") with
insured depository institutions, including, but not limited to, the Bank;
 
WHEREAS, Higher One, pursuant to its July 12, 2013 Agreement with the Bank
beginning on August 14, 2013, performed essential elements of the banking
relationship including facilitating the opening of accounts as an agent of the
Bank and soliciting deposits on behalf of the Bank;
 
WHEREAS, pursuant to section 7(c) of the Bank Service Company Act (12 U.S.C. §
1867(c)), services that Higher One provided to the Bank are subject to
regulation and examination by the Board of Governors to the same extent that
such services would be subject to regulation and examination as if performed by
the Bank on its own premises;
 
 
 
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WHEREAS, the Board of Governors and the Federal Reserve Bank of Philadelphia
("Reserve Bank") conducted inquiries that assessed the practices of the Bank and
Higher One; WHEREAS, this Order is issued with respect to the following:
 
A. Schools often need to disburse financial aid refunds to students.  Many types
of financial aid funds are initially distributed in full to the school, which
then deducts the student's tuition and other amounts payable to the school. Any
remaining amount is known as a "refund." Schools are responsible for
distributing the refunds to the students, typically by paper check or by
Automated Clearing House ("ACH") transfer to a student's bank account.
 
B. In 2000, Higher One created the OneDisburse service (also known as the
"Refund Management" service) whereby schools could outsource the financial aid
refund disbursement process, resulting in time- and cost-savings for the
schools.  Higher One offered students three methods of receiving their financial
aid refund: (1) direct deposit to the Higher One deposit

account and student debit card product known as the "OneAccount" (which was
marketed at several product levels, including the OneAccount, OneAccount Flex,
OneAccount Edge, and OneAccount Premier); (2) ACH transfer to another bank
account; or (3) paper check, if permitted by the school.
 
C. Because Higher One is not an insured depository institution, as that term is
defined in section 3(c)(2) of the FDI Act (12 U.S.C. § 1813(c)(2)), Higher One
contracted with an insured depository institution to establish and maintain the
OneAccounts.  The Bank has provided demand deposit accounts in connection with
the OneAccounts since August 14, 2013.
 
D. Through this business model, Higher One under the Bank's oversight,
controlled students' access to and information about financial aid refund
disbursement options because students were required by their schools to use the
Higher One website to select the method of the financial aid refund disbursement
or wait at least two weeks to receive a refund check by default as required by
Department of Education regulations.
 
E. Higher One and the Bank benefitted from students directing their financial
aid refunds to the OneAccount instead of to an alternative bank account or paper
check.  Higher One earned income from all fees paid by students in connection
with the accounts.  Some of the fees were unusual, such as a fee of 50 cents for
using the debit card linked to the OneAccount as a point-of-sale purchase that
was executed through the entry of a PIN, rather than executed by signature like
a credit card, and a fee of 3.5 percent for withdrawing funds from a bank teller
(described as a "cash advance fee"). In addition, Higher One received the
interchange fees paid by merchants to issuing banks in connection with the debit
card linked to the OneAccount and fees paid by the Bank for servicing the
account.  Although the Bank did not receive any OneAccount fees paid by
students, the Bank did receive benefits from holding and deploying the funds
held in non-interest bearing demand deposit accounts.
 
F. During the period from August 14, 2013 to December 19, 2013 ("Relevant
Period"), the Higher One website and associated materials used for selecting the
disbursement method for refunds contained material omissions about certain fees,
features, and limitations of the OneAccount, which were likely to mislead
students acting reasonably under the circumstances. Information about the fees,
features, and limitations of the OneAccount was omitted entirely or was not
clear and conspicuous. Examples of these omissions that were in effect during
all or part of the Relevant Period included, but were not limited to:

i. There was no information on the refund disbursement home page – the first
webpage that would appear when a student started the disbursement selection
process for the first time – about the ACH transfer to another bank account and
paper check options, either of which may have enabled students to access their
student financial aid refunds with fewer fees or no fees.
 
ii. On the web page where the student made a choice about the method of refund
disbursement, information about the speed of receiving a refund through the
OneAccount was readily available, but there was no information about the fees,
features, and limitations of the OneAccount located on that page, making it
difficult for students to make a fully informed decision prior to selecting the
method for financial aid disbursement.
 
 
 
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iii. Information about the availability of fee-free ATM locations was not
available on the web page where the student made a choice about the method of
refund disbursement.  There was no information about the hours of availability
of any specific fee-free ATMs located on any of the web pages, even though some
fee-free ATMs were on campus locations that were closed on nights, weekends, and
holidays.
 
iv. It was only at the final web page, after the student had selected a refund
delivery mechanism and entered all personal information, that a complete fee
schedule and the terms and conditions were readily available for the student to
view.  The fee schedule contained information about ATM fees for using
non-Higher One ATMs.  The student would need to click on another link to find
information about fee-free ATM locations.  There was no information on hours of
availability for fee-free ATMs. If the student wanted to change his or her
choice of refund delivery mechanism, the student would need to back out through
the previous screens to reach the appropriate web page and resubmit all personal
information.
 
v. Although the Bank is a bricks-and-mortar institution, there was no
information on the website explaining that the OneAccount was an Internet-only
checking account.
 
vi. The website for most of the participating schools featured the school logo
more prominently than the Higher One logo or the fine-print reference to the
Bank, which may have erroneously implied that the schools endorsed the
OneAccount as a preferred method of disbursement of financial aid refunds.
 
G. The deficiencies specified in paragraphs A. through F. above resulted in
deceptive acts or practices in or affecting commerce, within the meaning of
section 5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1)), and unsafe or unsound
banking practices.
 
WHEREAS, as of December 19, 2013, about four months after Higher One began
soliciting OneAccount deposits on behalf of the Bank, the Higher One enrollment
website no longer contained significant material omissions about the fees,
features, and limitations of the OneAccount;

WHEREAS, since entering into the Agreement with Higher One, the Bank has taken
steps to improve FTC Act compliance;
 
WHEREAS, during the Relevant Period, there were approximately 220,000 new
OneAccounts opened at the Bank;

WHEREAS, on July 7, 2014, after a non-objection from the Board of Governors,
Higher One provided by electronic mail (or USPS mail, if necessary) the
following information to existing customers who had opened OneAccounts held at
the Bank during the Relevant Period: information about ACH transfer and paper
check options for receipt of financial aid refunds; a copy of the Fee Schedule
and Terms and Conditions; and a description of the account closing procedures;
and also provided fee waivers for certain foreign ATM, debit card, and cash
transactions for a 30-day period;
 
WHEREAS, on December 23, 2015, the Board of Governors issued upon consent a
combined order to cease-and-desist and assessment of civil money penalty against
Higher One in In the Matter of: Higher One, Inc. Docket No. 15-026-E-I (the
"Higher One Consent Order");
 
WHEREAS, paragraphs 6 through 10 of the Higher One Consent Order required Higher
One to provide restitution for fees that Higher One received from eligible
consumers from on or after May 4, 2012 through and including July 7, 2014,
including those consumers who opened accounts at the Bank during the Relevant
Period;
 
WHEREAS, as of December 28, 2015, Higher One has provided all funds necessary to
provide restitution to consumers, which began on May 10, 2016;

WHEREAS, on June 16, 2016, Customers Bancorp, Inc. and the Bank purchased the
Refund Management Disbursement Service including the OneAccount Product from
Higher One Holdings, Inc. and Higher One and as a result directly controls the
representations made to consumers regarding the OneAccount or any similar
product offered by the Bank thereafter;
 
 
 
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WHEREAS, the practices described above warrant the assessment of a civil money
penalty by the Board of Governors against the Bank under section 8(i)(2) of the
FDI Act, as amended (12 U.S.C. § 1818(i)(2));
 
WHEREAS, on October 21, 2016, the board of directors of the Bank, at a duly
constituted meeting, adopted a resolution authorizing Jay S. Sidhu to enter into
this Order on behalf of the Bank and consent to compliance with each and every
applicable provision of this Order by the Bank and its institution-affiliated
parties, as defined in sections 3(u) and 8(b)(3) of the FDI Act (12 U.S.C. §§
1813(u) and 1818(b)(3)), and waiving any and all rights that the Bank may have
pursuant to section 8 of the FDI Act (12 U.S.C. § 1818), including, but not
limited to: (i) the issuance of a notice of charges; (ii) a hearing for the
purpose of taking evidence on any matters set forth in this Order; (iii)
judicial review of this Order; (iv) contest the issuance of this Order by the
Board of Governors; and (v) challenge or contest, in any manner, the basis,
issuance, validity, terms, effectiveness or enforceability of this Order or any
provision hereof:
 
NOW, THEREFORE, before the filing of any notices, or taking of any testimony or
adjudication of or finding on any issues of fact or law herein, and for the
purpose of settling this matter without a formal proceeding being filed and
without the necessity for protracted or extended hearings or testimony, it is
hereby ORDERED, pursuant to sections 8(b)(1), (2) and (3), and 8(i)(2) of the
FDI Act (12 U.S.C. §§ 1818(b)(1), (2), and (3), and 1818(i)(2)), that:

No Misrepresentations or Omissions
 
1. The Bank shall continue to take all action necessary to correct all
violations of the FTC Act cited in the Federal Reserve's UDAP Review of the
OneAccount Product Offered by the Bank and Higher One, dated May 8, 2014, and
maintain future compliance with the FTC Act. The Bank shall not make, or allow
to be made, any misleading or deceptive representation, statement, or omission,
expressly or by implication, in the marketing materials, telemarking scripts,
sales presentations, websites, mobile applications, social media content, and/or
any similar communications used to solicit any consumer in connection with any
consumer or commercial deposit, lending, or other product or service that the
Bank offers or may offer. Additionally, the Bank shall take all action necessary
to ensure that all material information needed by a consumer to make an informed
decision about the method of receiving a financial aid refund is provided in
advance of a consumer making such a decision and that all representations are
substantiated.  Without limiting the generality of the foregoing, the Bank shall
not make any misrepresentations and/or omissions including, but not limited to,
any misrepresentation and/or omission related to:

(a) options for receiving financial aid refunds through a bank account by ACH
transfer and by paper check;
 
(b) information about the fees, features and limitations of the OneAccount, or
any similar account offered as a depository account for financial aid refunds,
including limitations on cash deposits and withdrawals;
 
(c) information about fee-free ATM locations and hours of availability,
including information on fees assessed by foreign ATMs;
 
(d) whether the school endorses or prefers the OneAccount, or any similar
account offered as a depository account for financial aid refunds, over the
options of consumers' receipt of the financial aid refund through another bank
account by ACH transfer or by paper check; and
 
(e) the approximate timing of funds availability for each financial aid
disbursement option.
 
2. The Bank shall ensure that all marketing materials, telemarking scripts,
sales presentations, websites, and/or any similar communication used to solicit
any consumer to open a OneAccount at the Bank, or any similar account offered as
a depository account for financial aid refunds, clearly and conspicuously
disclose the name of the third party offering the account (if any) and the
Bank's name, including contact information for the third party and the Bank.
 
3. The Bank shall ensure that clear and conspicuous disclosures are provided to
consumers, prior to choosing a financial aid refund disbursement method,
including disclosures regarding the locations and availability of its network of
fee-free ATMs, and that the use of ATMs on other networks will result in foreign
ATM fees.
 
 
 
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Board and Senior Management Oversight

4. Within 90 days of this Order, the board of directors of the Bank shall submit
to the Reserve Bank an acceptable written plan to strengthen the board's
oversight of the compliance risk management program.  The plan shall describe
the actions that the board of directors will take to improve the Bank's
compliance risk management program and a timeline for the actions to be taken. 
The plan shall, at a minimum, address, consider, and include:

(a) measures to communicate the board of directors' clear expectations regarding
compliance with consumer protection laws and regulations, including section
5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1));
 
(b) measures to ensure adherence to approved compliance policies, procedures,
and standards for consumer protection laws and regulations, including section
5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1));

(c) measures to ensure that the compliance program is administered by senior
management and other personnel with sufficient expertise in, and knowledge of,
applicable consumer protection laws and regulations, including section 5(a)(1)
of the FTC Act (15 U.S.C. § 45(a)(1)), and to ensure that the Bank has adequate
levels and types of officers and staff to comply fully with all requirements of
this Order;
 
(d) measures to ensure the appropriate and timely resolution of audit findings,
compliance risk assessments, and examination findings for consumer protection
laws and regulations, including section 5(a)(1) of the FTC Act (15 U.S.C. §
45(a)(1)); and
 
(e) measures to enhance the information and reports that will be regularly
reviewed by the board of directors including, compliance risk assessments
regarding consumer protections laws and regulations, including section 5(a)(1)
of the FTC Act (15 U.S.C. §45(a)(1)), and reports on the status and results of
measures taken, or to be taken, by senior management to remediate outstanding
compliance issues, to implement major compliance initiatives, and to comply
fully with this Order.
 
Consumer Compliance Risk Management Program

5. Within 90 days of this Order, the Bank shall submit to the Reserve Bank an
acceptable written plan to enhance the consumer compliance risk management
program to ensure that the marketing, processing, and servicing of consumer
products and services, including consumer products and services offered through
a third party ("Third Party Products"), comply with all consumer protection laws
and regulations, including section 5(a)(1) of the FTC Act (15 U.S.C. §
45(a)(1)). The consumer compliance committee of the board of directors shall
have responsibility for overseeing the development and implementation of the
plan required by this paragraph.  The plan shall, at a minimum, address,
consider, and include:
 
(a) measures to ensure that the program is developed in accordance with
applicable supervisory guidance of the Board of Governors, including, but not
limited to, the guidance entitled, "Guidance on Managing Outsourcing Risk,"
dated December 5, 2013 (SR 13-19/CA 13-21); "Community Bank Risk-Focused
Consumer Compliance Supervision Program," dated November 18, 2013 (CA 13-19);
"Consumer Compliance Examination Procedures for the Unfair or Deceptive Acts or
Practices Provisions of Section 5 of the Federal Trade Commission Act," dated
November 6, 2007 (CA 07-8); and "Unfair or Deceptive Acts or Practices by State-
chartered Banks," dated March 11, 2004 (CA 04-2);
 
(b) measures to enhance the Higher One website, or any website developed for the
purpose of offering a similar depository account for financial aid refunds, and
other communications to ensure that consumers receive material information in a
manner that is timely, accurate, clear, and conspicuous;
 
(c) measures to ensure that the compliance program is administered by compliance
personnel with sufficient expertise in, and knowledge of, applicable consumer
protection laws and regulations, including section 5(a)(1) of the FTC Act (15
U.S.C. § 45(a)(1)), and to ensure that sufficient personnel is provided to
comply fully with all requirements of this Order;
 
 
 
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(d) measures to enhance policies and procedures for:

(i) the review, approval, and maintenance by the Bank of: (1) all marketing,
advertising, solicitation materials (including direct mail or Internet
solicitations, promotional materials, telemarketing scripts, website content,
mobile applications, and social media content), and similar communications for
consumer products and services, including Third Party Products; (2) other
materials provided to consumers generated in connection with the marketing,
processing, and servicing of consumer products and services, including any
account agreements and account statements; (3) all materials related to customer
service; (4) all materials documenting the service-level standards for services
provided by all Third Party Product providers, partners, servicers, vendors, and
any of their providers or sub-servicers (collectively, "Third Party Product
Providers"), including due diligence reports, monitoring and audit results, and
financial materials; and (5) any material changes thereto;
 
(ii) periodic compliance reviews, including on-site visits, as appropriate, by
the Bank of all Third Party Product Providers whose role is material to the
provision of consumer products and services on behalf of the Bank;
 
(iii) prompt notification to the Bank by its Third Party Product Providers of
any complaints, regardless of the source; inquiries or investigations from
federal or state agencies or legislative bodies; and legal actions received from
any party raising concerns about the practices of any Third Party Product
Providers;
 
(iv) promptly addressing and resolving consumer complaints and inquiries arising
in connection with consumer products or services, including any Third Party
Product, monitoring such complaints and inquiries and identifying any trends
concerning the nature of the complaints, and promptly addressing the root causes
of such complaints and inquiries;
 
(v)  regular meetings between the Bank and Third Party Product Providers for
which the Bank will take and maintain written notes;

(vi) the periodic review by the Bank's board of directors and senior management
of the Bank's business and strategic plans relating to agreements with Third
Party Product Providers;
 
(vii) assessing consumer compliance risk, performing the necessary due diligence
in the approval of new relationships with Third Party Product Providers, and
implementation of appropriate risk management procedures and controls for new
relationships with Third Party Product Providers; and
 
(viii) updating policies and procedures on an ongoing basis as necessary to
incorporate new or changes to consumer protection laws, regulations, and
supervisory guidance issued by federal agencies affecting consumer products or
services, including Third Party Products;
 
(e)                  measures to ensure on-going, periodic training of
appropriate Bank personnel, including the board and senior management, that
addresses compliance with consumer protection laws and regulations, including,
but not limited to, section 5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1));
 
(f)                   measures to enhance the risk monitoring process and
management information systems to identify, manage and promptly correct
compliance weaknesses, including any weaknesses in compliance with section
5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1)), in the marketing, processing, and
servicing of consumer products and services, including Third Party Products;

(g)                  measures to enhance the internal controls, including
enhancing internal audits for compliance with consumer protection laws and
regulations, including section 5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1)), in
the marketing, processing, and servicing of consumer products and services,
including Third Party Products;
 
(h)                  measures to ensure that any arrangement with a Third Party
Product Provider to market, process, and/or service Third Party Products
requires that the Bank has the ultimate authority to determine the terms,
manner, and conditions under which the Third Party Product will be marketed,
processed, and/or serviced for consumers, and that the Third Party Product
Provider will make any changes, on a prospective basis, in such terms, manner,
and conditions that that Bank deems necessary to comply with applicable laws,
regulations, and/or regulatory guidance; and
 
(i)                   to the extent that the Bank will rely on Third Party
Product Providers to assist in ensuring the Bank's compliance with the
requirements of this Order, the plan required by this paragraph must include a
detailed explanation of the services to be provided by Third Party Product
Providers to assist in ensuring the Bank's compliance with the requirements of
this Order and the means by which the Bank will ensure that these services are
successfully performed by Third Party Product Providers.
 
 
 
 
 
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Civil Money Penalty

6. The Board of Governors hereby assesses the Bank a civil money penalty in the
amount of $960,000 to be paid to the Board of Governors at the time of the
execution of this Order by Fedwire transfer of immediately available funds to
the Federal Reserve Bank of Richmond, ABA No. 05 1000033, beneficiary, Board of
Governors of the Federal Reserve System.  The Board of Governors or the Federal
Reserve Bank of Richmond on its behalf shall remit the funds to the United
States Treasury, pursuant to section 8(i) of the FDI Act (12 U.S.C. § 1818(i));

Progress Reports

7. Within 30 days after the end of each full calendar quarter following the date
of this Order, the board of directors of the Bank shall submit to the Reserve
Bank written progress reports detailing the form and manner of all actions taken
to secure compliance with this Order, a timetable and schedule to implement
specific remedial actions to be taken, and the results thereof.

Approval and Implementation of Plans and Programs

8. The Bank shall submit written plans that are acceptable to the Reserve Bank
within the applicable time periods set forth in this Order.
 
9. Within 10 days of approval by the Reserve Bank, the Bank shall adopt the
approved plans.  Upon adoption, the Bank shall promptly implement the approved
plans, and thereafter fully comply with them.
 
10. During the term of this Order, the approved plans shall not be amended or
rescinded without the prior written approval of the Reserve Bank.
 
11. The Bank shall make no representations to any insured depository
institution, any consumers, or any other person or entity that the Board of
Governors, the Reserve Bank, or any employee, agent, or representative of the
Board of Governors or the Reserve Bank have endorsed or approved any aspect of
any product or service offered by the Bank.
 
Communications

12. All communications regarding this Order shall be sent to:
 

 
(a)
William T. Wisser
   
Assistant Vice President
   
Federal Reserve Bank of Philadelphia
   
Ten Independence Mall
   
Philadelphia, Pennsylvania 19106
       
(b)
Richard M. Ashton
   
Deputy General Counsel
   
Board of Governors of the Federal Reserve System
   
Washington, D.C. 20551
       
(c)
Jay S. Sidhu
   
Chairman and Chief Executive Officer
   
Customers Bank
   
99 Bridge Street
   
Phoenixville, Pennsylvania 19460
         
With a copy to:
       
(d)
Andrew L. Sandler
   
Michelle L. Rogers
   
BuckleySandler LLP
   
1250 24th Street, NW, Suite 700
   
Washington, D.C. 20037

 
 
 
 
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Miscellaneous

13. Notwithstanding any provision of this Order to the contrary, the Reserve
Bank may, in its sole discretion, grant written extensions of time to the Bank
to comply with any provision of this Order.
 
14. The provisions of this Order shall be binding upon the Bank, and their
institution- affiliated parties, in their capacities as such, and their
successors and assigns.
 
15. Each provision of this Order shall remain effective and enforceable until
stayed, modified, or terminated, or suspended in writing by the Reserve Bank.
 
16. The provisions of this Order shall not bar, estop, or otherwise prevent the
Board of Governors, the Reserve Bank, or any other federal or state agency from
taking any further or other action affecting the Bank, or any of their current
or former institution-affiliated parties or their successors or assigns, or any
other of the Bank's subsidiaries; however, the Board of Governors shall not take
any further action against the Bank based upon the conduct described in the
WHEREAS clauses of this Order to the extent known by the Board of Governors as
of the effective date of this Order.  This release and discharge shall not
preclude or affect any right of the Board of Governors to determine and ensure
compliance with this Order or any proceeding brought by the Board of Governors
to enforce the terms of this Order.
 
17. Nothing in this Order, expressed or implied, shall give to any person or
entity, other than the parties hereto and their successors hereunder, any legal
or equitable right, remedy, or claim under this Order.
 
By Order of the Board of Governors effective this 2nd day of December, 2016.

CUSTOMERS BANK
BOARD OF GOVERNORS
OF THE FEDERAL RESERVE SYSTEM
   
By: /S/
By: /S/
Jay S. Sidhu
Robert deV. Frierson
Chairman and
Secretary of the Board
Chief Executive Officer
         

 
 
 
 
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