Document:

ex10-51.htm

Exhibit 10.51

 

 

UNITED STATES OF AMERICA BEFORE THE

BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON, D.C.

 

 

	
 
	
 
	
 

	
In the Matter of:
	
 
	
Docket No.        15-026-E-I

	
 
	
 
	
                            15-026-CMP-I

	
HIGHER ONE, INCORPORATED
	
 
	
 

	
New Haven, Connecticut
	
 
	
Order to Cease and Desist and Order 

	
 
	
 
	
of Assessment of Civil

	
An Institution-Affiliated Party of 
	
 
	
Money Penalty Issued Upon Consent

	
 
	
 
	
Pursuant to the Federal Deposit

	
CUSTOMERS BANK,
	
 
	
Insurance Act, as Amended

	
Phoenixville, Pennsylvania
	
 
	
 

	
 
	
 
	
 

	
A State Member Bank; 
	
 
	
 

	
 
	
 
	
 

	
and
	
 
	
 

	
 
	
 
	
 

	
A Former Institution-Affiliated Party of
	
 
	
 

	
 
	
 
	
 

	
COLE TAYLOR BANK
	
 
	
 

	
Chicago, Illinois
	
 
	
 

	 	 	 
	
A Former State Member Bank
	
 
	
 

	 	 	 
	 	 	 

 

 

 

WHEREAS, in recognition of the common goals of the Board of Governors of the Federal Reserve System (“Board of Governors”) and Higher One, Incorporated, New Haven, Connecticut (“Higher One”), an institution-affiliated party, under sections 3(q) and 3(u) of the Federal Deposit Insurance Act, as amended (the “FDI Act”) (12 U.S.C. §§ 1813(q) and (u)) of Customers Bank, Phoenixville, Pennsylvania (“Customers Bank”), a state-chartered member of the Federal Reserve System, and a former institution-affiliated party of Cole Taylor Bank, Chicago, Illinois (“Cole Taylor Bank”), at all relevant times for purposes of this Order a state-chartered member of the Federal Reserve System (collectively, the “Banks”), to ensure compliance by Higher One 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)), the Board of Governors and Higher One 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, Higher One provides financial aid and reimbursement services to colleges and universities (collectively, “Schools”) and demand deposit account services to students and former students throughout the United States through relationships established by entering into Deposit Processing Service Agreements (“Agreement” or “Agreements”) with insured depository institutions including, but not limited to, the Banks;

 

WHEREAS, Higher One, pursuant to the Agreements with the Banks, performed essential elements of the banking relationship including facilitating the opening of accounts as an agent of the Banks and soliciting deposits on behalf of the Banks;

 

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 Banks 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 Banks on their own premises;

 

WHEREAS, the Board of Governors, the Federal Reserve Bank of Chicago (“Chicago Reserve Bank”) and the Federal Reserve Bank of Philadelphia (“Philadelphia Reserve Bank”) (collectively the “Reserve Banks”) have conducted inquiries that assessed the practices of Higher One, Cole Taylor Bank, and Customers Bank;

 

 

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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 refunds to the students, typically by paper check or 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 offers 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 contracts with an insured depository institution to establish and maintain the OneAccounts. From May 4, 2012 to August 14, 2013, Cole Taylor Bank provided demand deposit accounts in connection with the OneAccounts. Customers Bank has provided demand deposit accounts in connection with the OneAccounts since August 14, 2013.

 

D.     Through this business model, Higher One and the Banks 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.

 

 

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E.     Higher One 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 is executed through 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 Banks for servicing the account. The Banks benefitted from holding and deploying the funds held in the non-interest bearing demand deposit accounts.

 

F.     During the period from May 4, 2012 to December 19, 2013 (the “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 certain fees, features, and limitations of the OneAccount was omitted entirely or was not clear and conspicuous. Examples that were in effect at the Banks 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.

 

 

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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.

 

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 specific fee-free ATMs. If the student wanted to change his or her choice of refund delivery mechanism before opening the account, the student would need to back out through previous screens to reach the appropriate web page and resubmit all personal information.

 

 

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v.     Although the Banks were bricks-and-mortar institutions, 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 Banks, which may have erroneously implied that the schools endorsed the OneAccount as the 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, 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 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; 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, during the Relevant Period, there were approximately 850,000 new OneAccounts opened at the Banks, and approximately 570,000 of these accounts were assessed at least one of the fees that were not properly disclosed as described in Paragraph 8(a) of this Order;

 

WHEREAS, Higher One has agreed to make restitution to the Banks’ account holders affected during the Relevant Period;

 

 

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WHEREAS, the practices described above warrant the assessment of a civil money penalty by the Board of Governors against Higher One under section 8(i)(2) of the FDI Act, as amended (12 U.S.C. § 1818(i)(2));

 

WHEREAS, on December 17, 2015, the board of directors of Higher One, at a duly constituted meeting, adopted a resolution authorizing Marc Sheinbaum to enter into this Order on behalf of Higher One and consent to compliance with each and every applicable provision of this Order by Higher One and waiving any and all rights that Higher One 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 section 7(d) of the Bank Service Company Act (12 U.S.C. § 1867(d)) and sections 8(b)(1), and 8(i)(2) of the FDI Act (12 U.S.C. §§ 1818(b)(1), and 1818(i)(2)), that:

 

 

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No Misrepresentations or Omissions

 

1.     Higher One 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 Cole Taylor Bank and Higher One, Inc., dated May 7, 2014, and The Federal Reserve’s UDAP Review of the OneAccount Product Offered by Customers Bank and Higher One, Inc. dated May 8, 2014, and maintain future compliance with the FTC Act with respect to the OneAccount or any student financial aid-related consumer deposit or lending product or service that is or may be offered when Higher One is acting as an institution-affiliated party or service provider for a state member bank (“State Member Bank Partner”) (“Products or Services”).

 

Higher One shall not make, or allow to be made, any misleading or deceptive representation, statement, or omission, expressly or by implication, in the marketing materials, telemarketing scripts, sales presentations, websites, and/or any similar communications used to solicit any Product or Service. Additionally, Higher One 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, Higher One shall not make any misrepresentations and/or omissions including, but not limited to, any misrepresentation and/or omissions of material facts 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, 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 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.

 

 

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2.     Higher One shall ensure that all marketing materials, telemarking scripts, sales presentations, websites, and/or any similar communications used to solicit any consumer to open an account at a state member bank clearly and conspicuously disclose Higher One’s name and the State Member Bank Partner’s name, including contact information for Higher One and the State Member Bank Partner.

 

3.     Higher One shall clearly and conspicuously disclose to consumers, prior to choosing a financial aid refund disbursement method, the locations and availability of its network of ATMs, and that the use of ATMs on other networks will result in foreign ATM fees. 

 

Consumer Compliance Risk Management Program

 

4.     Within 90 days of this Order, Higher One shall submit to the Philadelphia Reserve Bank an acceptable written plan to enhance the consumer compliance risk management program to ensure that the marketing, processing, and servicing of all consumer Products and Services 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 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);

 

 

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(b)     measures to enhance the Higher One website and other consumer 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 fully comply with all requirements of this Order;

 

(d)     measures to enhance appropriate policies and procedures for:

 

(i)     the review, approval and maintenance by Higher One and any State Member Bank Partner of: (1) all marketing, advertising, solicitation materials (including direct mail or Internet solicitations, promotional materials, telemarketing scripts and website content), and similar communications; (2) other materials provided to consumers generated in connection with the marketing, processing, and servicing of Products or Services , including any agreements and account statements; (3) all materials related to customer service; and (4) any material changes thereto;

 

(ii)     to the extent permitted by applicable law promptly notifying any State Member Bank Partner, of any consumer complaints, regardless of the source; inquiries or investigations from federal or state agencies or legislative bodies; and legal actions received from any party;

 

(iii)     promptly addressing and resolving consumer complaints and inquiries arising from any product or service, 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;

 

 

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(iv)     maintaining and, to the extent permitted by applicable law, making available upon request by a State Member Bank Partner any and all records, reports and materials required by this Order or related to a Product or Service provided;

 

(v)     assessing consumer compliance risk and performing the necessary due diligence in the approval of new products or new outsourcing arrangements, and implementation of appropriate risk management procedures and controls for new products or outsourcing arrangements; and

 

(vi)     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;

 

(e)     measures to ensure on-going, periodic training of appropriate Higher One 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 Products or Services; and

 

(g)     measures to enhance the internal controls, including enhancing internal audits for compliance with consumer protection laws and regulations, including compliance with section 5(a)(1) of the FTC Act (15 U.S.C. § 45(a)(1)), in the marketing, processing, and servicing of Products or Services.

 

 

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5.     Higher One shall ensure that any arrangement to offer Products or Services with any State Member Bank Partner provides that the State Member Bank Partner has ultimate authority to determine the terms, manner, and conditions under which any product or service will be offered to consumers, and that Higher One will make any changes, on a prospective basis, to such terms, manner, and conditions as the State Member Bank Partner deems necessary to comply with applicable laws, regulations, or regulatory guidance.

 

Restitution and Other Relief

 

6.     Within 10 days of this Order, Higher One shall deposit an amount of not less than $24,000,000 into a qualified settlement fund pursuant to section 1.468B-1, et seq., of the Treasury Regulations, promulgated under section 468B of the Internal Revenue Code, or otherwise into a segregated deposit account at an insured depository institution acceptable to the Philadelphia Reserve Bank (“Reserve Account”) for the purpose of providing restitution as provided by this Order. Higher One shall make all restitution payments required by this Order regardless of whether the total of such payments exceeds the segregated amount required by this Paragraph. No disbursements may be made out of the Reserve Account, except those made pursuant to the restitution plan submitted to and not objected to by the Philadelphia Reserve Bank pursuant to the terms of Paragraph 8 of this Order.

 

 

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7.           (a)     Within 30 days of the Order, Higher One shall submit to the Philadelphia Reserve Bank for non-objection a proposed announcement regarding this Order and restitution to be posted on Higher One’s website, including procedures whereby individuals can check their eligibility for restitution to be made by Higher One and provide updated electronic mail and/or United States Postal Service mailing address information, via a toll-free number and via the Higher One website, if they have not received electronic mail and/or a letter from Higher One addressing this Order. Higher One shall submit to the Philadelphia Reserve Bank, for review and non-objection, the proposed announcement and procedures. The Philadelphia Reserve Bank shall notify Higher One in writing of any comments or non-objection to the proposed announcement and procedures. Higher One shall address any comments of the Philadelphia Reserve Bank, and make such changes as may be required. Upon receipt of the Philadelphia Reserve Bank’s written non-objection, the announcement and procedures, incorporating any changes that may be required in response to comments by the Philadelphia Reserve Bank, shall be implemented by Higher One, without further changes.

 

(b)        Higher One shall submit to the Philadelphia Reserve Bank the text of an announcement to all of Higher One’s OneDisburse clients whose accounts are handled by a State Member Bank Partner notifying them of this Order.

 

8.     Within 60 days of this Order, Higher One shall submit to the Philadelphia Reserve Bank an acceptable written plan to provide for remediation and restitution in connection with this Order (“OneAccount Restitution Plan”). The OneAccount Restitution Plan shall, at a minimum, address, consider, and include:

 

(a)        Provisions for Higher One to make the restitution described in accordance with the provisions set forth below:

 

(i)     Higher One shall make restitution to OneAccount account holders who opened a OneAccount at Cole Taylor Bank or Customers Bank during the Relevant Period (the “Eligible Consumers”);

 

 

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(ii)     Restitution shall consist of all OneAccount fees received from all Eligible Consumers on or after May 4, 2012 and to and including July 7, 2014 (“Restitution Period”) for: merchant PIN-based debit transactions; non-Higher One ATM transactions; abandoned accounts; cash advance (i.e., bank teller withdrawal); delinquent accounts; GreenDot cash deposit; lack of documentation; and other improperly disclosed uncategorized fees that are not specifically identified above (“Restitution Fees”);

 

(iii)     Restitution provided by Higher One shall not limit consumers’ rights in any way;

 

(iv)     Restitution Fees may be decreased in the following amounts to the extent that Higher One provides appropriate documentation:

 

a.     by the amount of any of the Restitution Fees already refunded to Eligible Consumers during the Restitution Period and one month thereafter, provided that the refund corresponds to one or more of the Restitution Fees;

 

b.     by the amount of any of the Restitution Fees charged off for Eligible Consumers during the Restitution Period and one month thereafter, provided that the fee charged off corresponds to one or more of the Restitution Fees; and,

 

c.     by the amount of restitution provided to Eligible Consumers as a result of the settlement in In re: Higher One OneAccount Marketing and Sales Practices Litigation, No. 3:12-md-02407 (VLB) (D. Conn.) with respect to Restitution Fees charged to Eligible Consumers during the Restitution Period;

 

(v)     Restitution shall apply to all Eligible Consumers regardless of whether the OneAccounts are closed, charged-off, sold, or otherwise transferred at the time of restitution except as provided for in Paragraph 8(a)(iv);

 

 

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(vi)     Except as provided herein, payments of the Restitution Fees for the Restitution Period shall be made by credits to the OneAccounts of Eligible Consumers entitled to such credits for those accounts held by Customers Bank. If, as of the date that restitution would have been made pursuant to this Order, an Eligible Consumer’s OneAccount has been closed, charged-off, sold, or otherwise transferred, the amount of restitution to which the Eligible Consumer is entitled will be made by check to the holder of the respective OneAccount; and

 

(vii)     Higher One shall provide the Philadelphia Reserve Bank with the data and information necessary to determine the restitution for Eligible Consumers, after which the Philadelphia Reserve Bank shall provide Higher One with the list of Eligible Consumers and the amounts of restitution to be paid to each Eligible Consumer. After an opportunity for Higher One to comment, the Philadelphia Reserve Bank shall submit to Higher One (and any third-party identified in the accepted OneAccount Restitution Plan as the trustee/paying agent) the final list of Eligible Consumers and amount of restitution to be paid to each, and payment by Higher One (or the third-party paying agent) of such amounts pursuant to the OneAccount Restitution Plan shall be deemed in compliance with the restitution requirements of this Order.

 

(b)     Proposed text of the electronic mail, letters, and envelopes that will be sent to Eligible Consumers entitled to credits to their accounts, the proposed text of the letters that will accompany the restitution checks to Eligible Consumers, and a proposed sample restitution check. The text of the electronic mail and letters shall include: satisfactory language explaining the reason Higher One is crediting the account or sending a restitution check together with an explanation of the manner in which the amount of restitution was calculated; a reference to and the web addresses for any press releases by the Board of Governors related to this Order; and a statement that the restitution payment does not, in any manner, limit a consumer’s rights. The face of each restitution check shall clearly and conspicuously state the number of days within which the Eligible Consumer must cash the check. The Philadelphia Reserve Bank shall notify Higher One in writing of any comments or non-objection to the proposed electronic mail, letters, checks, or envelopes. Higher One shall address any comments of the Philadelphia Reserve Bank, making such changes as may be required to the proposed electronic mail, letters, checks, or envelopes. The electronic mail, letters, checks, or envelopes incorporating any changes that may be required in response to comments by the Philadelphia Reserve Bank shall be sent without further changes to all Eligible Consumers entitled to receive credits to their accounts or checks for restitution in accordance with this Order.

 

 

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9.     Within 20 days after receipt of the Philadelphia Reserve Bank’s written non- objection of the OneAccount Restitution Plan, the restitution described in Paragraph 8 shall be made and the electronic mail, letters, checks, and envelopes described in Paragraph 8 shall be sent in accordance with the Philadelphia Reserve Bank’s comments, if any, to the Eligible Consumers. Electronic mail for Eligible Consumers who are to receive restitution by credits shall be sent to the electronic mail address of the Eligible Consumers. Letters and any checks are to be sent by United States Postal Service first-class mail, address correction service requested, to each Eligible Consumer’s last known address reflected in Higher One’s records, the school’s records if available, or the most recent address provided by the National Change of Address System. The envelopes shall contain only the materials to which the Reserve Bank has provided a non-objection. Higher One shall make reasonable attempts to locate Eligible Consumers or their estates, including a standard address search using the National Change of Address System, or other similar system, if the notification letter and/or restitution check is returned for any reason. Higher One shall promptly re-mail all returned letters and restitution checks to corrected addresses, if any.

 

 

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10.           (a)     No earlier than 90 days from the date the restitution checks were originally mailed (“Void Date”), Higher One may void all checks that were returned or have not been negotiated, provided Higher One includes a mechanism in the OneAccount Restitution Plan by which Eligible Consumers can obtain a restitution payment for a period of 360 days from the date the restitution check was originally mailed.

 

(b)     The total amount of any restitution payments that had been made by checks that were voided and that were not cashed or deposited by Eligible Consumers, and the total amount of any interest or other payments earned on the Reserve Account shall be distributed to the United States Treasury.

 

(c)     Once the Board of Governors determines that all required restitution obligations described in paragraphs 9 and 10 (a) and (b) of this Order have been satisfied and the Board of Governors issues the appropriate non-objection, Higher One may close the Reserve Account and remit to Higher One any excess funds remaining therein.

 

Independent Third-Party Auditor

 

11.         Within 30 days of the date of this Order, Higher One shall hire an independent auditor who is acceptable to the Philadelphia Reserve Bank, who shall verify that Higher One made restitution as directed by the Philadelphia Reserve Bank. The independent auditor shall prepare a final written report (“Final Report”) evaluating the processes and procedures by which Higher One determined and made the restitution, including the amounts of all restitution credits and refunds required by this Order. The OneAccount Restitution Plan shall contain a date by which the independent auditor’s Final Report shall be submitted to the Philadelphia Reserve Bank for non-objection. Prior to delivery of the Final Report, the Philadelphia Reserve Bank may require the independent auditor to produce an interim report or other updates related to Higher One’s restitution of Eligible Consumers as required by this Order. All reports by the independent auditor shall be submitted to Higher One and the Philadelphia Reserve Bank.

 

 

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Civil Money Penalty

 

12.     The Board of Governors hereby assesses Higher One a civil money penalty in the amount of $2,231,250 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 for the civil money penalty assessment to the United States Treasury, pursuant to section 8(i) of the Federal Deposit Insurance Act (12 U.S.C. 1818(i)).

 

Approval and Implementation of Plans and Programs

 

13.     Higher One shall submit written plans that are acceptable to the Philadelphia Reserve Bank within the applicable time periods set forth in this Order.

 

14.     Unless otherwise provided above, within 10 days of approval by the Philadelphia Reserve Bank, Higher One shall adopt the approved plans. Upon adoption, Higher One shall promptly implement the approved plans, and thereafter fully comply with them.

 

15.     During the term of this Order, the approved plans shall not be amended or rescinded without the prior written approval of the Philadelphia Reserve Bank.

 

16.     Higher One shall make no representations to any insured depository institution, any consumer, or any other person or entity that the Board of Governors, the Reserve Banks, or any employee, agent, or representative of the Board of Governors or the Reserve Banks have endorsed or approved any aspect of any product or service offered by Higher One.

 

 

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Recordkeeping

 

17.     For 7 years from the effective date of this Order, Higher One shall retain all records pertaining to the OneAccount Restitution Plan including but not limited to: documentation of the processes and procedures used to determine Eligible Consumers; the names, contact, and account information of Eligible Consumers; any mailing records; and documentation that the appropriate restitution and equitable relief were made. 

 

Communications

 

	 	
18.
	
All communications regarding this Order shall be sent to:

 

	 	
(a)
	
Chris Henderson

	 	 	
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)
	
Casey McGuane

	 	 	
Chief Operating Officer 

Higher One, Inc.

115 Munson Street

New Haven, Connecticut 06511 

With a copy to:

 

	 	
(d)
	
William F. Kroener III 

Sullivan & Cromwell LLP

	 	 	
1700 New York Avenue, NW, Suite 700 

Washington, D.C. 20006

 

 

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Miscellaneous

 

19.     Notwithstanding any provision of this Order to the contrary, the Philadelphia Reserve Bank may, in its discretion, grant written extensions of time to Higher One to comply with any provision of this Order.

 

20.     The provisions of this Order shall be binding upon Higher One, its institution- affiliated parties, in their capacities as such, and its successors and assigns.

 

21.     Each provision of this Order shall remain effective and enforceable until stayed, modified, or terminated, or suspended in writing by the Philadelphia Reserve Bank.

 

22.     The provisions of this Order shall not bar, estop, or otherwise prevent the Board of Governors, the Reserve Banks, or any other federal or state agency from taking any further or other action affecting Higher One, or any of its current or former institution-affiliated parties or its successors or assigns, or any other of Higher One’s subsidiaries; however, the Board of Governors shall not take any further action against Higher One 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.

 

23.     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.

 

 

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By Order of the Board of Governors of the Federal Reserve System effective this 23rd day of December, 2015.

 

 

	
HIGHER ONE, INCORPORATED  
	
 
	
BOARD OF GOVERNORS  

	
 
	
 
	
 
	
OF THE FEDERAL RESERVE SYSTEM  

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
 
	
 
	
 
	
 
	
 

	
By:
	
  /s/ Marc Sheinbaum
	
 
	
By:
	
/s/Robert de v. Frierson

	
 
	
       Marc Sheinbaum
	
 
	
 
	
     Robert deV. Frierson

	
 
	
       Chief Executive Officer
	
 
	
 
	
     Secretary of the Board

  

 

22ex10-52.htm

Exhibit 10.52

 

 

FEDERAL DEPOSIT INSURANCE CORPORATION 

 

WASHINGTON, D.C.

 

 

	
 
	)	
 
	
 
	 
	
In the Matter of:
	)	
 
	 	 
	
 
	)	
 
	CONSENT ORDER, ORDER	 
	HIGHER ONE, INC., as an	)	
 
	
FOR RESTITUTION, AND
	 
	institution-affiliated party of	)	
 
	ORDER TO PAY	 
	
WEX BANK
	)	
 
	CIVIL MONEY PENALTY	 
	MIDVALE, UTAH	)	
 
	 	 
	
 
	)	
 
	FDIC-15-0129b	 
	 	)	
 
	FDIC-15-0130k	 
	(INSURED STATE NONMEMBER BANK)	)	
 
	
 
	 
	 	)	 	 	 
	 	)	 	 	 

 

 

The Federal Deposit Insurance Corporation (“FDIC”) is the appropriate Federal banking agency for Higher One, Inc. (“Higher One”), an institution-affiliated party (“IAP”) of WEX Bank, Midvale, Utah (“the Bank”), under sections 3(q) and 3(u) of the Federal Deposit Insurance Act (“FDI Act”), 12 U.S.C. § 1813(q) and 1813(u).

 

The FDIC determined that Higher One engaged in deceptive acts or practices in or affecting commerce, in violation of section 5 of the Federal Trade Commission Act (“Section 5”), 15 U.S.C. § 45(a)(1), arising from the marketing to and enrollment of consumers into the OneAccount product offered through the Bank.

 

Higher One, by and through its duly elected and acting Board of Directors (“Board”), has executed a STIPULATION AND CONSENT TO THE ISSUANCE OF A CONSENT ORDER, ORDER FOR RESTITUTION, AND ORDER TO PAY CIVIL MONEY PENALTY (“CONSENT AGREEMENT”), dated December 18     , 2015, which is accepted by the FDIC. With the CONSENT AGREEMENT, Higher One has consented, without admitting or denying any charges of violations of law or regulation, to the issuance of this CONSENT ORDER, ORDER FOR RESTITUTION, AND ORDER TO PAY CIVIL MONEY PENALTY

(collectively “ORDER”) by the FDIC.

 

 

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FINDINGS OF FACT

 

 

The FDIC finds the following facts:

 

(1)     Colleges and universities (hereinafter referred to as “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 refunds to the students, typically by paper check or Automated Clearing House (“ACH”) transfer to a student’s bank account.

 

(2)     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 offers students three methods of receiving their financial aid refund: (a) 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); (b) ACH transfer to another bank account; or (c) paper check, if permitted by the school.

 

(3)     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 contracts with insured depository institutions to establish and maintain the OneAccounts. From May 4, 2012 through the Effective Date (defined herein), WEX Bank provided demand deposit accounts in connection with OneAccounts.

 

 

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(4)     Through this business model, Higher One and the Bank 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.

 

(5)     Higher One 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. These fees included the following: (a) cash advance fees (i.e., bank teller withdrawal); (b) merchant PIN-based debit transaction fees; (c) non-Higher One ATM transaction fees; (d) delinquent account (an account with insufficient funds in excess of a grace period) fees; (e) GreenDot cash deposit fees; (f) abandoned account (an account that has not been accessed by the consumer in excess of a grace period) fees; (g) lack of documentation fees; and (h) improperly disclosed uncategorized fees. In addition, Higher One received (a) interchange fees paid by merchants to issuing banks in connection with the debit card linked to the OneAccount; and (b) fees, charges, and interchange income generated by its ATMs and from its payment processing services.

 

(6)     During the period beginning May 4, 2012 through December 19, 2013 (the “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 certain fees, features, and limitations of the OneAccount was omitted entirely or was not clear and conspicuous. Examples that were in effect during all or part of the Relevant Period included, but are not limited to the following:

 

(a)     Each of the webpages in the enrollment process featured the students’ school logos more prominently than either the Higher One logo or any references to the Bank.

 

 

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(b)     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.

 

(c)     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 displayed prominently, while information about certain fees, features, and limitations of the OneAccount was missing on that page, making it difficult for students to make a fully informed decision prior to selecting the method for financial aid disbursement.

 

(d)     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. While Higher One generally provided at least one fee-free ATM on each campus, some fee-free ATMs were on campus locations that were closed on nights, weekends, and holidays. Similarly, the website did not contain information notifying the student that the OneAccount was an Internet-only checking account.

 

(e)     It was only after the student 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. While the fee schedule contained information about ATM fees for using non-Higher One ATMs, the student had to click on another link to find information about fee-free ATM locations. If the student wanted to change his or her choice of refund delivery mechanism before opening the account, the student had to click back through previous screens to reach the appropriate web page and resubmit all personal information.

 

 

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(7)     The violations described above resulted in deceptive acts or practices in or affecting commerce, within the meaning of Section 5, and unsafe or unsound banking practices.

 

(8)     During the Relevant Period, nearly 978,500 new OneAccounts were opened at the Bank and more than 755,000 of these accounts were assessed at least one of the fees described in the Order for Restitution.

 

(9)     On July 15, 2014, Higher One provided by electronic mail (or USPS mail, if necessary) the following information to existing customers who had opened OneAccounts 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; 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.

 

DEFINITIONS

 

 

For purposes of this ORDER, the following definitions shall apply:

 

1.     “Board” shall mean Higher One’s duly elected and acting Board of Directors.

 

2.     “Effective Date” shall mean the date on which this ORDER is issued.

 

3.     “Regional Director” shall mean the FDIC Regional Director for the San Francisco Region.

 

4.     “WEX Bank Order” shall mean, collectively, the Consent Order, Order for Restitution, and Order to Pay Civil Money Penalty issued by the FDIC on    December 23 , 2015.

 

 

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Having determined that the requirements for issuance of an order under sections 8(b) and 8(i)(2) of the FDI Act, 12 U.S.C. §§ 1818(b) and 1818(i)(2), have been satisfied, the FDIC hereby issues the following ORDER:

 

CONSENT ORDER

 

 

IT IS HEREBY ORDERED that Higher One, as an IAP of the Bank, cease and desist from engaging in unsafe or unsound banking practices and violations of law and/or regulations described in this ORDER.

IT IS FURTHER ORDERED that Higher One shall take the following affirmative actions:

Correct Violations of Law

 

5.     Within 60 days of the Effective Date, Higher One shall continue to correct all violations of law, as described in the FDIC’s Visitation Letter as of November 3, 2014 and in the WEX Bank Order, and implement procedures to prevent their recurrence in connection with the OneAccount or any student financial aid-related consumer deposit or lending product or service that is or may be offered when Higher One in acting as an IAP for the Bank or any “insured depository institution” for which the FDIC is the “appropriate Federal banking agency” as those terms are defined in 12 U.S.C. §§ 1813(c)(2) & (q) (collectively “Products or Services”). Higher One’s actions as required by this paragraph shall be satisfactory to the Regional Director as determined at subsequent examinations and/or visitations.

 

 

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Deceptive Acts and Practices

 

 

6.     Higher One shall take all action necessary to eliminate any violations of Section 5 and maintain future compliance with Section 5. Higher One, whether acting directly or through third parties, shall not make, or allow to be made, any deceptive representations, statements, or omissions, expressly or by implication, in any marketing materials, telemarketing scripts, sales presentations, and/or websites used to solicit any consumer or in any similar communications to open a Product or Service. Additionally, Higher One 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 decision and that all representations are substantiated. Without limiting the generality of the foregoing, Higher One shall not make any misrepresentations and/or omissions of material facts related to:

 

(a)     all options available to a consumer seeking disbursement of a financial aid refund;

 

(b)     information about the fees, features and limitations of the Product or Service, including limitations on any type of cash deposits and withdrawals;

 

(c)     information about Higher One ATM locations and hours of availability, including information on fees assessed by foreign ATMs used for access to financial aid refunds;

 

(d)     for any Product or Service associated with financial aid refunds, whether the school endorses or prefers the Product or Service over other options for the 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 alternative financial aid refund disbursement options.

 

7.     Higher One shall ensure that initiating direct payments electronically to an existing account is as timely as, and no more onerous than, initiating direct payment through any Product or Service offered as a depository account for financial aid refunds, including, but not limited to, the OneAccount.

 

 

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8.     Higher One shall ensure that paper checks, to the extent offered to students, are issued on the same day it receives a request from a consumer for a financial aid refund disbursement through a paper check, or if the request is received following business hours, the next business day.

 

9.     Higher One, whether acting directly or through third parties, shall ensure that all marketing materials, telemarketing scripts, sales presentations, websites, and/or any similar communications used to solicit any consumer to open a Product or Service offered as a depository account for financial aid refunds, clearly discloses Higher One’s name and the insured depository institution’s name, including contact information for Higher One and the insured depository institution.

 

10.     Higher One must clearly and conspicuously disclose to its consumers, prior to choosing a financial aid refund disbursement method, the locations and availability of its network of ATMs, and that the use of ATMs on other networks will result in foreign ATM fees.

 

Board and Senior Management Oversight

 

 

11.     The Board and Senior Management shall participate fully in the oversight of Higher One’s Compliance Management System (“CMS”) with respect to Products or Services, and shall be responsible for:

 

(a)     the approval of sound policies and objectives;

 

(b)     ensuring an adequate compliance program is in place that addresses all consumer compliance risks associated with Products or Services; and

 

 

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(c)     the effective supervision of all of Higher One’s compliance-related activities with respect to Products or Services, including activities conducted by third parties on behalf of Higher One, consistent with the role and expertise commonly expected for directors of companies of comparable size and complexity and offering comparable products and services.

 

Compliance Management System

 

12.     Within 90 days from the Effective Date, Higher One shall conduct a review of its CMS as it pertains to Products or Services, including changes implemented as a result of prior supervisory actions. Based on the review, Higher One shall revise, develop, and/or implement, as necessary, a sound risk-based CMS, including revising, as necessary, its comprehensive written compliance program (“Compliance Program”), to ensure that all Products or Services offered by Higher One comply with Section 5 and all applicable consumer protection laws, implementing rules and regulations, regulatory guidance, and statements of policy (collectively “Consumer Protection Laws”).

 

13.     Higher One shall ensure that its Compliance Program with respect to Products or Services, at a minimum, includes comprehensive written policies and procedures, including detailed operating procedures and controls, designed to prevent violations of Consumer Protection Laws and the associated risks of harm to consumers, including Section 5. Higher One’s policies and procedures shall also provide guidance for the following:

 

(a)     an effective training program that addresses compliance with Consumer Protection Laws and includes regular, specific, comprehensive training of the Board, senior management, staff, third-party staff, and all individuals having responsibilities that relate to Consumer Protection Laws. The training shall be commensurate with individual job functions and duties for appropriate staff, be specific to the products and services offered by Higher One, and incorporate training for all high-risk compliance areas, including Section 5;

 

 

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(b)     an enhanced, well-documented, and proactive internal monitoring process, incorporated into the daily work of company personnel, that is designed to detect and promptly correct CMS weaknesses within the company, particularly weaknesses that have an impact on consumer accounts. The monitoring processes and procedures should include, without limitation, the following:

 

i.     review and approval by Higher One and, as applicable, by the Bank or any other insured depository institution of (a) all marketing, advertising, and solicitation materials, including direct mail, promotional materials, telemarketing scripts, and website content; (b) other materials provided to customers or potential customers generated in connection with the marketing, administration, and servicing of such Product or Service, including agreements, privacy policies, and statements; and (c) any material changes or amendments thereto; and maintenance of copies of the above-derived materials by Higher One;

 

ii.     timely and regular notification by Higher One to, as applicable, the Bank or any other insured depository institution, inquiries or legal actions and any legal action commenced by any customer or potential customer;

 

iii.     review and approval by Higher One and, as applicable, the Bank or other insured depository institutions, of all materials related to policies and procedures concerning customer service, monitoring of customer service calls on a regular basis; and

 

iv.     regular, quarterly meetings between Higher One and, as applicable, the Bank or any other insured depository institution;

 

 

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(c)     an effective consumer complaint monitoring process that includes procedures for promptly addressing and resolving all written, oral, or electronic complaints or inquiries, formal or informal, received by Higher One, monitoring of such complaints, analyzing and identifying any trends concerning the nature of such complaints, promptly addressing any root causes of such complaints, and documenting and tracking all complaints and inquiries through resolution; promptly notifying the Bank or any other insured depository institution, as applicable, of regulatory agencies’ inquiries, customer complaint correspondence from all sources of complaints, including social media and internet-based complaints, or legal action received, in each case related to a Product or Service; and

 

(d)     an effective, independent audit of the Compliance Program and Higher One’s compliance operations with respect to Products or Services offered, to ensure compliance with all Consumer Protection Laws and internal policies and procedures. Audits shall be conducted at least annually and conducted by qualified personnel with experience in conducting independent audits of compliance programs to ensure compliance with all Consumer Protection Laws. The audits will assess Higher One’s CMS and Compliance Program with respect to Products or Services and at a minimum, shall:

 

i.     define a comprehensive scope to include appropriate aspects of each law or regulation based on a risk analysis;

 

ii.     identify the number of transactions sampled by category or product type;

 

iii.     identify deficiencies;

 

iv.     provide descriptions of, or suggestions for, corrective actions and timeframes for correction; and

 

 

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v.     establish follow-up procedures to verify that corrective actions are implemented and effective.

 

Audit findings, deficiencies and recommendations must be documented in a written report and provided to the Risk and Compliance Committee of the Board within 15 days after completion of the independent audit. In addition, the audit report should be thoroughly reviewed by the Board and fully documented in the Board’s minutes.

 

14.     Prior to implementation, the Board shall review the revised written Compliance Program and/or any subsequent modification thereto and, finding it acceptable, the Board shall approve it and record the approval in the Board minutes.

 

ORDER FOR RESTITUTION

 

IT IS FURTHER ORDERED that Higher One provide restitution to consumers as follows:

 

Segregated Account

 

15.     Within 10 days from the Effective Date, Higher One shall deposit into a trust or otherwise segregated deposit account an amount not less than $31,000,000 for the purpose of providing restitution as required by the ORDER (“Segregated Account”). The Bank may contribute funds to the Segregated Account. If the Segregated Account is set up as a qualified settlement fund, pursuant to section 1.468B-1, et seq., of the Treasury Regulations, promulgated under section 468B of the Internal Revenue Code, Higher One shall ensure that the Segregated Account satisfies all the requirements of 26 C.F.R. § 1.468B-1. No disbursements shall be made out of the Segregated Account, except those made pursuant to the OneAccount Restitution Plan submitted to and not objected to by the Regional Director pursuant to the terms of this ORDER.

 

 

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16.     Higher One shall make all restitution payments required by the ORDER, regardless of whether the total of such payments exceeds the Segregated Account. If the total of payments is less than the Segregated Account, the excess shall be returned to Higher One’s general funds or returned as agreed between Higher One and the Bank.

 

17.     Restitution under this ORDER and the WEX Bank Order is intended to cover the same consumers without duplication of restitution payments. Higher One and the Bank may reach a separate agreement between them concerning the funding and distributing of restitution under this ORDER and the WEX Bank Order.

 

Restitution Plan

 

 

18.     Within 60 days from the Effective Date, Higher One shall, in consultation with the Bank, prepare and submit to the Regional Director a comprehensive Restitution Plan for all OneAccount Holders (“OneAccount Restitution Plan”).

 

19.     “OneAccount Holder” shall mean any consumer who opened a OneAccount at WEX Bank to facilitate receipt of the consumer’s financial aid refund from May 4, 2012 through December 19, 2013.

 

20.     “Restitution Fees” shall mean any fee or penalty received from a OneAccount Holder as a result of (a) a cash advance (i.e., bank teller withdrawal); (b) a merchant PIN-based debit transaction; (c) a non-Higher One ATM transaction; (d) a delinquent account (an account with insufficient funds in excess of a grace period); (e) a GreenDot cash deposit; (f) an abandoned account (an account that has not been accessed by the consumer in excess of a grace period); (g) a lack of documentation; or (h) an improperly disclosed uncategorized transaction.

 

 

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21.     The OneAccount Restitution Plan shall, at a minimum, require Higher One to provide restitution to OneAccount Holders who have incurred one or more of the Restitution Fees (“Eligible Consumers”). The Restitution Fees shall be calculated for the period commencing May 4, 2012 through July15, 2014 (“Restitution Period”). The restitution shall be equal to all such fees charged to the Eligible Consumer’s account during the Restitution Period.

 

22.     Restitution provided by Higher One shall not limit consumers’ rights in any way.

 

23.     Restitution to Eligible Consumers of the Restitution Fees in accordance with this ORDER shall apply to all Eligible Consumers regardless of whether their OneAccounts are closed, charged-off, sold, or otherwise transferred. Higher One’s restitution obligation for the Restitution Fees on each Eligible Consumer’s OneAccount for the Restitution Period may be reduced to the extent any such Restitution Fee was previously credited in compromise of a claim to the respective OneAccount at Higher One’s expense or paid to the respective Eligible Consumer by Higher One during the Restitution Period in compromise of a claim for such Restitution Fee by Higher One in favor of such Eligible Consumer to the extent Higher One provides appropriate documentation.

 

24.     Except as provided below, payments of the Restitution Fees for the Restitution Period shall be made by credits to the OneAccounts of Eligible Consumers entitled to such credits. If, as of the date that restitution has been made pursuant to this ORDER, an Eligible Consumer’s OneAccount has been closed, charged off, sold, or otherwise transferred, the amount of restitution to which the Eligible Consumer is entitled will be made by restitution check to the holder of the respective OneAccount.

 

 

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25.     Higher One shall submit to the Regional Director for review, comment, and non- objection prior to implementation, the OneAccount Restitution Plan, including samples of letters to consumers. The text of letters and/or electronic mail to be sent to Eligible Consumers shall include satisfactory language explaining the reason Higher One is sending a restitution payment, including that Higher One is sending the payment, providing a statement credit, or a combination of the two. The letters and/or electronic mail shall also include reference to and the web addresses for any FDIC press releases related to the ORDER, and shall include a reference that the restitution payment does not, in any manner, limit a consumer’s rights. The letters and/or electronic mail, incorporating any changes that may be required in response to comments by the Regional Director, shall be sent by United States Postal Service first-class mail and/or electronic mail to all Eligible Consumers entitled to receive restitution payments in accordance with the ORDER.

 

26.     Within 60 days of receipt of non-objection from the Regional Director, Higher One shall implement the OneAccount Restitution Plan.

 

27.     Within 30 days from the Effective Date, Higher One shall submit to the Regional Director, for review and non-objection, a proposed announcement to be prominently posted on Higher One’s website that describes the ORDER and the restitution to be made by Higher One to Eligible Consumers. The announcement shall set forth procedures whereby consumers can check their eligibility for restitution from Higher One and can provide updated electronic mail and/or United States Postal Service mailing address information, via a toll-free number and via Higher One’s website. The Regional Director shall notify Higher One in writing of any comments or non-objection to the proposed announcement. Higher One shall address any comments of the Regional Director, making such changes as may be required to the proposed announcement. Within 10 days of the Regional Director’s written non-objection, the announcement shall be prominently and promptly posted by Higher One to its website without further changes.

 

 

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28.     Within 30 days from the Effective Date, Higher One shall send an announcement to all of Higher One’s OneDisburse clients that describes the ORDER and the restitution to be made by Higher One to Eligible Consumers. Higher One will send a copy of the announcement to the Regional Director before it is sent to Higher One’s OneDisburse clients.

 

Mailing Refunds

 

29.     When Higher One makes cash restitution by certified or bank check made payable to an Eligible Consumer, Higher One shall send the certified or bank check by United States Postal Service first-class mail, address correction service requested, to the Eligible Consumer’s last address as maintained in Higher One’s records. Higher One shall make reasonable attempts to obtain a current address for any Eligible Consumer whose notification letter and/or restitution check is returned for any reason, using standard address search methodologies, and shall promptly re-mail all returned letters and/or restitution checks to current addresses, if any. If the certified or bank check for any Eligible Consumer is returned to Higher One after such second mailing by Higher One, or if a current mailing address cannot be identified using standard address search methodologies, Higher One shall retain the restitution amount of such Eligible Consumer for a period of 360 days from the date the restitution check was originally mailed, during which period such amount may be claimed by such Eligible Consumer upon appropriate proof of identity. After such time, these monies will be disposed of in accordance with the OneAccount Restitution Plan.

 

30.     Higher One shall not undertake collection efforts in the same mailing as that containing any of the restitution checks and/or notification letters. Further, Higher One shall not condition, expressly or by implication, the provision of a credit or cash payment pursuant to this ORDER on the payment of any outstanding debt.

 

 

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Recordkeeping

 

 

31.     Higher One shall retain for seven years all records pertaining to the OneAccount Restitution Plan, including but not limited to: documentation of the processes and procedures used to determine Eligible Consumers; the names, contact, and account information of Eligible Consumers; any mailing records; and documentation that the appropriate restitution and equitable relief were made.

 

Independent Third-Party Auditor

 

 

32.     Within 30 days from the Effective Date, Higher One shall hire an independent, third-party auditor that is acceptable to the Regional Director to audit Higher One’s completion of the OneAccount Restitution Plan as set forth in the Order for Restitution.

 

33.     Within 45 days of implementation of the OneAccount Restitution Plan, the independent, third-party auditor shall verify that:

 

(a)     Higher One accurately identified the Eligible Consumers eligible for restitution pursuant to the OneAccount Restitution Plan required by this ORDER;

 

(b)     Higher One accurately calculated the restitution amount for each Eligible Consumer pursuant to the OneAccount Restitution Plan required by this ORDER; and

 

(c)     Higher One made the appropriate restitution payments to each Eligible Consumer as required by this ORDER.

 

34.     Within 90 days of implementation of the OneAccount Restitution Plan, the independent, third-party auditor shall prepare a detailed written report describing the status of the OneAccount Restitution Plan and payment distribution and submit it to the Regional Director for review, comment, and non-objection, and shall continue to submit such additional interim reports until completion of the restitution required by this ORDER as directed by the Regional Director. The independent auditor shall submit a final written report evaluating the processes and procedures by which Higher One determined and made the restitution, including the amounts of all restitution credits and refunds required by this Order. Restitution under this ORDER shall not be deemed complete until the Regional Director notifies Higher One, in writing, that refund requirements of the OneAccount Restitution Plan have been satisfied.

 

 

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ORDER TO PAY CIVIL MONEY PENALTY

 

 

IT IS FURTHER ORDERED that by reason of the violations of law and/or regulations set forth herein, and after taking into account the appropriateness of the penalty with respect to the size of the financial resources and good faith of Higher One, the gravity of the violations, the history of previous violations by Higher One, and such other matters as justice may require, including the severity of the risks to and losses of consumers, pursuant to 12 U.S.C. § 1818(i)(2), a civil money penalty of $2,231,250 is assessed against Higher One. Higher One shall pay such amount to the Treasury of the United States, as directed by the FDIC.

 

IT IS FURTHER ORDERED that Higher One is prohibited from seeking or accepting indemnification from any third party for the civil money penalty assessed and paid in this matter.

 

NOTIFICATION AND REPORTING REQUIREMENTS

 

Progress Reports and Shareholder Notification

 

35.     On or before the 30th day after the end of the first full calendar quarter following the Effective Date, and on or before the 30th day after the end of every calendar quarter thereafter, Higher One shall furnish written progress reports to the Regional Director detailing the form and manner of any actions taken to secure compliance with this ORDER and the results thereof.

 

 

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36.     Within 30 days of the Effective Date, Higher One shall send to its shareholder, Higher One Holdings, Inc., a copy of this ORDER or a description of this ORDER. If Higher One sends its shareholder a description of this ORDER rather than a copy of it, the description shall fully describe this ORDER in all respects. The description and any accompanying communication, statement, or notice shall be sent to the FDIC, Accounting and Securities Section, Washington, D.C. 20429, at least 15 days prior to dissemination to the shareholder. Any changes requested to be made by the FDIC shall be made prior to dissemination of the description, communication, notice, or statement.

 

SAVINGS CLAUSE

 

 

37.     The provisions of the ORDER shall not bar, estop, or otherwise prevent the FDIC or any other federal or state agency or department from taking any other action against Higher One, its officers, directors, employees, or agents.

 

38.     Calculation of time limitations for compliance with the terms of the ORDER shall be based on calendar days, unless otherwise noted.

 

39.     Higher One shall make no representation to any insured depository institution, any consumer, or any other person or entity that the FDIC or any employee, agent, or representative of the FDIC has endorsed or approved any aspect of any Product or Service offered by Higher One.

 

40.     The provisions of the ORDER shall be binding on Higher One, its officers, agents, servants, employees, and any successors and assigns thereof.

 

 

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41.     The provisions of the ORDER shall remain effective and enforceable except to the extent that and until such time as any provision has been modified, terminated, suspended, or set aside in writing by the FDIC.

 

Issued pursuant to delegated authority this    23rd    day of December  , 2015.

  

 

 

	
 
	
/s/Sylvia H. Plunkett                                              

Sylvia H. Plunkett

Senior Deputy Director

Division of Depositor and Consumer Protection

 

 

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