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Letter to Senator Brown

September 14, 2012

The Honorable Sherrod Brown
United States Senate
711 Hart Building
Washington, DC 20510


Dear Senator Brown:

We want to take this opportunity to respond to your letter dated September 12, 2012, to share information with you regarding the work that Higher One does on behalf of students and educational institutions in Ohio and around the country.  As you know, we proactively reached out to your office on July 13th and met with your staff on July 24th to brief them on our operations and explain several inaccuracies outlined in the U.S. PIRG Report released May 31, 2012 entitled the “Campus Debit Card Trap.” In August, we also sent your office details of our new Higher One Edge Account, which is described in greater detail below.  We look forward to continuing to share more information about our company, information that we believe will clarify a host of misconceptions and misinformation about the services we provide to students and higher education institutions.

Since its founding in 2000 by three college students, Higher One has re-invented the financial aid disbursement process for students and dedicated itself to being part of the solution of rising costs in Higher Education and not the problem.  Our platform allows students to receive their financial aid refunds faster, while ensuring students are afforded value, choice, transparency and financial literacy.  At the same time, we have helped hundreds of college and university campuses eliminate inefficiencies and avoid millions of dollars in expense in the face of decreased public funding.  In the State of Ohio alone, Higher One has saved campuses millions of dollars in disbursement expense and has a 100% client retention rate in the state since signing our first client institution in 2006.  

Higher One has created optional, high-value checking account services that are accessible to all college students.  Our streamlined operations allow us to provide services for students more effectively than national and regional banks.  As a result, we are able to offer checking accounts that are a great value for college students including the OneAccount—a no monthly fee, no minimum balance, FDIC-insured checking account that is designed for and by students.  On average, our customers pay less than half the amount in fees than students with other student checking accounts. Unlike most other regional and national banks serving students in Ohio, Higher One does not offer credit cards, car loans, mortgages or any other instruments of credit.   

Higher One’s mission is to evolve our products and services in a way that maximizes customer value in the most transparent and simple way possible. The OneAccount Edge is an example of a radically new and innovative account that we hope will change the way consumers and the industry think of retail checking. We have enclosed a copy of Higher One’s OneAccount Edge Announcement as Exhibit A, information that we also provided to your staff in August.  Higher One plans to launch Edge later this year with only one simple fee—$4.95 a month. The account will have: no minimum deposit requirement, no overdraft or non-sufficient funds (NSF) fees, no inactivity fees, no foreign ATM withdrawal fees or any other service charges associated with traditional checking accounts. Edge is a completely new retail checking experience that eliminates the conventional fee schedule.  Accountholders pay a single monthly fee and cannot incur any other fees related to their account activity.  

We also believe that all students must have access to the best financial literacy education.  As such, we provide all of our students with access to our financial literacy expert through her OneForYourMoney.com blog, financial literacy materials through our program website and also help advise client campuses on how to get financial literacy programs started.   We have even provided grant money for campuses to work with their students to create engaging programs.  

In response to the individual requests set forth in your letter, we would like to submit the following responses:

1.    Improving fees and disclosures, including: restrictions on over-the-limit fees; requirements that penalty fees be reasonable; and a prohibition against inactivity fees

Higher One is currently working with a leading research agency to launch a standardized disclosure form that will ensure uniformity and even greater transparency related to our fee schedule.  Our fee schedule includes a summary and explanation of all fees written in a manner that students can understand, and includes detailed instructions and videos on how to avoid fees.

Higher One does not charge overdraft fees for one-time debit card transactions and does not offer an overdraft program.  Overdraft programs are a form of credit that enable irresponsible spending behavior and Higher One does not issue credit to students or encourage such behavior.  Higher One assesses an insufficient or uncollected funds fee if a customer attempts to spend more money than is available in his or her account by either a purchase made with an e-check or paper check, or via ACH, or recurring debit card payments.  The amount of the fee is $29.00 for the first item and $38.00 for additional items.  Our research has shown this fee to be reasonable and comparable to national and regional banks offering the same services.  Please note that the OneAccount Edge will not have overdraft/NSF fees.

Regarding our account fees, we continually review and carefully analyze their structure based on feedback provided by our customers and the competitive environment.

2.    Restricting the use of tangible gifts to college students on or near campus, or at campus-sponsored events, in exchange for using debit card services;

Higher One does not provide tangible gifts to college students on or near campus, or at campus-sponsored events in exchange for using the OneAccount.

3.    Publicly disclosing all contracts between banks, firms, and schools, as six of my colleagues and I have urged higher education associations to do; and

Currently, the vast majority of Higher One contracts for financial aid refund disbursement services are subject to public disclosure pursuant to the various states’ public records laws.  Please note that the majority of higher education institution contracts with Higher One contain a confidentiality provision that prohibits us from sharing agreements with third parties.  Higher One understands and appreciates the importance of maintaining transparency and is not opposed to public disclosure of contracts.  As with any business, we are cognizant of the competitive disadvantage such disclosures may represent and believe a uniform disclosure process should take this into consideration.  

4.    Submit an annual report to the Consumer Financial Protection Bureau and Department of Education including the terms and conditions of all promotional agreements with colleges, including the number of student debit card accounts opened during the time period.

As of 2008, Higher One discontinued offering any institutional incentives or promotions in any agreements.  Since that time, Higher One has actively sought to terminate any such provisions in existing agreements.  As of the date of this letter, only 6% of legacy contracts contain any revenue sharing/promotional incentives.

Please also note that as a public company, Higher One cannot publish or distribute information that may be considered material and non-public or confidential in nature.  As such, Higher One may be prohibited from disclosing certain data that is material, non-public or otherwise confidential.  

We hope you find this information to be helpful and informative.  We have enclosed a brief document entitled “Fact Checker” that we created to address some of the claims about Higher One as Exhibit B.  Please contact us should you require any additional information or wish to learn more about Higher One.


andrew r
Andrew Rakaczki
Director of Government Relations

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