Higher One's Future Cloudy as Fees Investigated, Stock Price Drops, Executives Depart
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“Charged to Use a Debit Card as a Debit Card”
Since 2012, the company has abolished some of its most controversial fees, and has also more heavily marketed an account that charges $4.95 per month with no fees and one at $5.95 per month with fewer fees but more services.
But a majority of its customers, Lemoine says, still use the OneAccount, which includes Higher One’s most unusual and controversial fee. The so-called “PIN” fee charges students 50 cents when they make a purchase with their debit card unless they tell the merchant to make the transaction credit. In short, they get charged for using a debit card as a debit card.
Critics say the fee is deceptive and unfair. Higher One adds to the confusion by constantly reminding students theirs is a debit not credit card. “They call it a debit card, but you would assume there’s no fees if you have a debit card,” said Tanner Kelly, student trustee at Coast Community College in Orange County, Cal. “If you swipe your card four times a day, that’s $2 a day and $700 a year. It’s deceptive.”
The fee is among the most common complaints about Higher One, and the company has abolished it at some schools after protests. This year, the Oregon state legislature is again considering a bill to outlaw the charge.
In addition to 50-cent fees paid by students, the charge fattens Higher One’s bottom line because merchants generally pay more for credit card transactions—a percentage versus a flat fee for debit cards.
Lemoine acknowledges that the fee is “not common,” but added it was more common a decade ago. “We’ve dropped this fee on two of our accounts,” she says. “The charge still exists on the basic OneAccount because there’s a cost structure on the back end. This PIN fee is avoidable. All you have to do is swipe and choose credit.”
But the GAO concluded that doesn’t always work because some merchants make credit more difficult to save on interchange fees.
A Shortage of ATMs?
Another longstanding complaint against Higher One is the number and location of its ATMs. The company has 870 ATMs at its approximately 600 schools, an average of 1.45 per campus, Lemoine says.
In addition, like at Southern, Higher One ATMs are typically located in buildings closed on weekends, nights, holidays and school vacations. To access their money during those times, students must pay the company $2.50 to use a foreign ATM. Students can pay up to $4.50 or more per transaction when the foreign ATM owner’s fees are added, according to U.S. PIRG. U.S. PIRG also claims Higher One ATMs sometimes run out of cash, especially early in the semester when students line up to access newly deposited funds.
Lemoine says that it is often colleges and universities that want the ATMs inside and closed after hours for security reasons or because of restrictive agreements with other institutions. “Wells Fargo or a very large bank may have an exclusive contract. In other instances, the college may say that the ATM is not in a secure location,” she says, adding that the company refunds up to $5 a day if machines go down and students access foreign ATMs. Its ATMs operate 98 percent of the time, the industry standard.
Lemoine also notes that two of the company’s three accounts allow students to use certain foreign ATMs some or all of the time.
The GAO report found that eight of nine schools it consulted did not report problems with students having to use foreign ATMs. It nonetheless recommended federal officials tighten and clarify rules to assure students have easy access to ATMs.