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WSU stands by decision to outsource refunding to Higher One, cites timliness, convenience

Students should read terms, be wary of ATM, PIN-based fees

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Posted: Monday, August 27, 2012 12:00 am | Updated: 12:06 pm, Fri Apr 5, 2013.

Wayne State students might have noticed a change in the way the university will be handling its financial aid disbursements, marked by the Higher One MyWSUCard—all students accepting some form of financial aid should have received in the mail within the last month.

The card is meant to function like a debit card for students who opt for a free checking account with Higher One. Students’ refunds, after tuition and university fees were paid, were previously deposited into a student’s pre-existing checking account or mailed in the form of a personal check. Now, students have the option to keep said refund in a separate Higher One checking account, in addition to the two other options.

The university’s decision to outsource has been met with some resistance, even controversy, particularly in light of Higher One’s recent settlement with the Federal Deposit Insurance Corporation for “alleged unfair and deceptive practices in violation of Section 5 of the Federal Trade Commision Act,” according to an FDIC press release issued Aug. 8. “Unfair and deceptive practices” refer to methods by which Higher One and The Bancorp Bank—of which Higher One is an institution-affiliated party-misled students into keeping and misusing their Higher One debit card through three ways.

One was through defaulting students into keeping their Higher One account unless they affirmatively opt-out of doing so. All students receiving financial aid through a school affiliated with Higher One are automatically given a Higher One checking account.

The second way was by imposing numerous and exorbitant “convenience fees,” including ATM fees, PIN transaction fees or overdraft fees. Higher One took in around $66 million in such fees in 2010 alone.

The third way was by making access to Higher One-approved ATMs inconvenient; some institutions using Higher One didn’t even have proper ATMs on campus.

The settlement imposed $11 million in restitution to be refunded to eligible students. The FDIC press release estimates that as many as 60,000 students will receive refunds. Additionally, civil fines have been assessed to the defendants $110,000 to Higher One and $172,000 to Bancorp.

Included in the settlement are stipulations that Higher One changes its practices, especially in the way it charges convenience fees as well as to “not make misleading or deceptive representations or omissions in its marketing materials or disclosures and to institute a sound compliance management system,” according to the press release.

Despite the controversy, WSU administration says that it has done its due diligence in expanding the university’s pre-existing relationship with Higher One, which already supplies the cashiering system on campus.

“The settlement doesn’t affect WSU because we only signed on with them recently, and we negotiated all of the fees in question out of our contract,” WSU Director of Communications Matt Lockwood said.

Associate Vice President for Fiscal Operations and Controller James Barbret echoed Lockwood’s statement, pointing out that “each school is contracted differently with Higher One, so we looked at current institutions and how they were set up and tried to learn from their mistakes. We structured our agreement so a number of these fees wouldn’t be included.”

Further, any remaining fees have been disclosed on both the Higher One and WSU websites. There are currently four separate locations on campus hosting an ATM that will not deduct service fees for Higher One debit card holders; they are located in the Welcome Center Building, Manoogian Hall, Scott Hall and the Towers Residence Suites.

Barbret said the university’s choice to use Higher One to handle financial aid disbursements and refunds was multi-faceted.

“We did this in consideration of many students who are in economically disadvantaged situations and can’t otherwise open a checking account of their own,” he said. “We wanted them to have an option to access funds immediately if necessary.”

One of Higher One’s main selling points to entice students into using their debit card is the incentive of immediate access to their refund when it is made available by the university. Students who choose to have their refund deposited into a third primary checking account or have a check sent in the mail are subject to waiting several days for their funds to become available.

Barbret lists convenience as another reason for the switch.

“Given repeated budget cuts to the department, we wanted to make the whole process of financial aid disbursement easier to handle,” Barbret said.

The choice to move forward with Higher One instead of seeking out an alternative institution came out of the belief that given the relationship Higher One already had through the Bursar’s office, which handles student accounts, it would be the most efficient and practical choice to move forward.

The need for a more efficient system is one WSU students are all too familiar with.

“I assume that the university decided to use Higher One because of how notoriously slow Wayne State has been at sending out refunds,” WSU student Noah Morrison said. “This is also probably to reduce the amount of resources they have to put into answering calls and complaints of people asking why they haven’t received their refund yet.”

WSU student Zee Bricker chose to reject her new account with Higher One.

“There is really no reason that I see to keep any remaining money in a separate bank account when I am absolutely happy with my old one anyway,” she said, adding that the lawsuit also serves as a deterrent. “It just makes me more wary and suspicious.”

Despite negative feedback from students, WSU has seen a dramatic shift in the ways in which students choose to receive their refunds.

As of Aug. 22, the latest administrative report showed at least 3,000 students opting for the MyWSUCard. Additionally, there was decrease in the number of paper checks issued; only 1,200 have been printed this semester as opposed to 4,600 sent out last year.

As with any important financial decision, students are advised to thoroughly research all of their options when choosing a route for managing their financial aid. Details of the Higher One account are available on their site at MyWSUCard.com, as well as on WSU’s website.

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