Tuesday, June 19, 2012

Student files class action suit against Higher One

Allege deceptive fees in student loans

Ventura, California – Little did community college student Sherry McFall know that when she applied for a student loan, she was signing a contract to pay off huge ATM fees over a 10 to 20-year period.

According to a Washington, D.C., law firm, Higher One and its parnter Bancorp Bank make false representations that they are the preferred banking services firm of hundreds of colleges and universities. They send their ATM cards to students, even before they have actually matriculated.

The ATM cards bear the MasterCard logo and serve as a student ID that is required for most transactions with the learning institution.

In order to access their loan funds, they are forced to use the on-campus machine provided by the bank.

But in spite of consumer protection laws, students are then also forced to pay exorbitant ATM usage fees, per-swipe, for inactivity, overdraft, as well as fees to re-load the cards.

Two area colleges that use the services of Higher One are McLennan Community College and Texas State Technical College.

“Because many of these fees are paid with student loan money, a student could be paying off these unfair and deceptive Higher One fees for the next 10 or 20 years, which is outrageous,” said Hassan Zavareei, a partner in the Washington, D.C., law firm of Tycko and Zavareei.

U.S. Department of Education rules forbid the deceptive practices alleged in Ms. McFall's class action lawsuit filed in Ventura County Superior Court.

The suit alleges that members of the class upon whose behalf the suit has been filed wind up paying as much as 50 cents to use their PIN when making a purchase, pay a monthly $19 inactivity penalty, and as much as $2.50 to use another bank's ATM.

Spread out over the typical college or university career, the fees add up; then they are rolled into the overall bill students pay against for as long as a couple of decades – and never know the difference.

According to the lawsuit, these practices are also forbidden by state and federal consumer protection laws. Not only do the students have no choice in the contracts they unwittingly sign between themselves, the institution of higher learning, and the bank, but they are forced to use the ATM machines provided at inconvenient locations and at odd times for which there is often no public access.

Other alleged deceptive practices include pre-loading of disbursement cards and outsourcing student ID services violates privacy issues.

“We are continuing to investigate the practices of Higher One and other banks who offer college students bank accounts and disbursement services. Students need to be compensated for practices which are, in essence, stealing their precious financial aid money,” said Mr. Zavareei.

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