UPDATE 1-FDIC settles with firms over student debit card charges
WASHINGTON Aug 8 (Reuters) - Two financial firms will pay penalties to settle charges that they overcharged students for debit card accounts, the Federal Deposit Insurance Corp said on Wednesday.
Higher One Holdings Inc, a payment processor of New Haven, Connecticut, will pay $11 million in restitution and a civil penalty of $110,000 over allegations of unfair and deceptive practices in its handling of a student debit card program.
Bancorp Bank, as issuer of the OneAccount debit card, will pay a $172,000 civil penalty. Bancorp Bank is a unit of Bancorp Inc of Wilmington, Delaware.
Both firms chose to neither admit nor deny the charges, the FDIC said.
"We believe the relatively low civil money penalty imposed reflects how seriously we take our commitment to our customers, the degree of the issue, and our level of cooperation with the FDIC," Higher One CEO Mark Volchek said in a statement. He also said the firm had already voluntarily incorporated some of the FDIC's suggested improvements into its policies.
Bancorp Bank was not immediately available for comment.
According to the FDIC, the firms allowed student accounts to accrue extra fees by permitting them to remain overdrawn for long periods of time. The banks also charged students multiple insufficient fund fees for a single transaction, the FDIC said.
The FDIC's order imposes restrictions on the way Higher One can charge fees for insufficient funds, by limiting the bank to no more than three such fees on a single account in a single day, for example. The FDIC also said the bank must not make misleading or deceptive statements in its marketing materials.
The restitution money will benefit roughly 60,000 students, the FDIC said.
Higher One, which went public in June 2010, was reported last week to be looking for a buyer.