The company behind prepaid debit cards held by thousands of college students in Georgia is on the verge of settling a class action lawsuit alleging deceptive marketing and failure to disclose outrageous fees.
Higher One is contracted to process financial aid for more than two dozen public colleges and universities in Georgia. As part of the agreements with those schools, students are sent debit cards which are intended to be used to disperse their student loan money.
While seemingly convenient, consumer advocacy group Consumer Union warns campus-sponsored cards may not be consumer friendly.
Suzanne Martindale, an attorney for Consumer Union, said the group researched several companies.
"We've seen high and unusual fees; the kinds of fees you wouldn't typically see on a regular retail bank account," Martindale said.
Fees from various companies include overdraft charges as high as $38, a 50 cent fee each time you use the debit card, and out-of-network ATM charges can run as high as $3. Some companies charge inactivity fees if you don't use the account.
"It was literally shoved down our throats," said Sean Magee, a student at Southern Polytechnic State University in Marietta.
Magee and other students are given the debit cards without requesting them. But when Magee learned of the card fees, he asked Higher One to send his funds directly to his own checking account so he didn't have to use the card. Magee said Higher One lost his $5,000 for two weeks, making him late on his bills.
"They're basically playing an entity between the school and myself as a student obtaining my money," Magee said. "It seems like one of those movies -they send the money off to get laundered and send it back to me. They're playing this mobster third party that I can't see a purpose of."
A class action lawsuit against Higher One alleges "aggressive" and "deceptive" marketing and a failure to disclose "unconscionable" fees.
Higher One is expected to settle the lawsuit this fall for an estimated $15 million without admitting wrongdoing. Consumer Union said Higher One has dropped the worst fees but it the consumer advocacy group still have concerns about the company's marketing tactics.
The contracts between institutions and Higher One are intended to help universities and colleges save money but many believes it's at students' expense.
"It makes me not want to tell people to go to school [at Southern Polytechnic State University] if they're just going to be used as a number or a wallet to pull from," Magee said.
Consumer Union found that while some accounts have low cost option, student need to use the accounts carefully or risk incurring hundreds of dollars a year in usage fees.
CBS46 investigative reporter Jeff Chirico reached out to Southern Polytechnic State University and the Georgia Board of Regents for comment but neither replied by Friday afternoon.
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