U.S. banking regulators on Wednesday ordered financial firm Higher One Holdings Inc to pay fines and restitution to borrowers over allegedly "deceptive" marketing practices in the disbursement of student loans.
The Federal Reserve ordered Higher One of New Haven, Connecticut, to pay about $24 million in restitution to approximately 570,000 students as well as a civil penalty of $2,231,250, the Fed said in a statement.
The Federal Deposit Insurance Corp, in a parallel case against the institution, also ordered Higher One to pay $2.23 million.
The FDIC also brought a related action on Wednesday against WEX Bank, which partners with Higher One, and ordered it to pay $1.75 million in fines.
The FDIC added that both Higher One and WEX Bank will also collectively pay $31 million in restitution as well to an estimated 900,000 consumers.
Higher One provides colleges with financial aid disbursement services for students so they can pay for things such as books and living expenses. The FDIC said the product at issue is a debit card that is offered in partnership with banks.
Regulators said Higher One engaged in a variety of deceptive practices, including omitting information about how students could get their financial aid disbursements without signing up for a Higher One product called OneAccount and not telling students about the product's fees, the Fed said.
In a statement on Wednesday, Higher One CEO Marc Sheinbaum said the company has already made changes to its products and services to address the issues raised by regulators.
"After joining Higher One in 2014, I charged our team to set new standards for transparency and compliance. Today, the account experience is significantly changed and an even better student experience will be unveiled in 2016," he said.
Last week Higher One announced it had reached an agreement to sell its disbursement business, including OneAccount, to Customers Bank for a gross price of $37 million in cash.
(Reporting by Jason Lange and Sarah N. Lynch; Editing by Jeffrey Benkoe and Andrew Hay)