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The Federal Reserve Bank of Chicago is investigating Higher One, the leading issuer of campus debit cards, and one of its former bank partners for potentially engaging in unfair or deceptive practices. The debit cards allow students to access their financial aid refunds directly through the card, as opposed to waiting for a check from their financial aid offices, then depositing the checks into their bank accounts.

Higher One mentioned the investigation in its annual report to the Securities and Exchange Commission and referred to a bank partner regulated by the Chicago Fed.

Issues with campus debit cards often boil down to one thing: the financial burden on students. It’s certainly convenient to have your financial aid refund added directly to a debit card, but such ease comes at a cost. The cards, like many debit cards, carry a slew of fees for things like overdrafting your account or using a non-bank ATM.

Students can avoid these fees by exercising caution when using the cards, but it’s unclear if students have been properly informed about the costs that come with their cards.

In 2012, the Federal Deposit Insurance Corp. fined Higher One $110,000 for violating the Federal Trade Commission Act by engaging in allegedly unfair and deceptive practices. Higher One, along with The Bancorp Bank, also had to pay $11 million in restitution to roughly 60,000 students harmed by the violations.

Higher One has already eliminated a handful of fees in recent years, a spokeswoman told the Huffington Post, but how this investigation will impact Higher One’s business and debit card offerings is unclear.

Learning About Fees

Card fees, no matter if they apply to student debit cards, prepaid cards or your bank-issued debit card, are often a point of contention among consumer advocates. In the case of debit cards tied to a financial aid refund, those fees add to an already costly financial product: student loans. Given the growing cost of higher education and the massive amount of outstanding education debt in the U.S., it’s unsurprising to see student debit cards undergo such scrutiny.

The investigation, whether or not it results in restitution to affected students, highlights an important issue: the need for clear terms of use for consumer financial products. Whether you carry a credit card, take out a loan or use a debit card, it’s important to understand any fees or penalties associated with the services you use.

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