WEX Bank, a subsidiary of the South Portland payment processing company WEX Inc., has been fined $1.75 million and ordered to pay a share of $31 million in restitution to 900,000 customers for its role in deceiving college students about financial aid disbursements.
WEX Bank signed a settlement agreement with the Federal Deposit Insurance Corp., the federal agency that insures deposits at financial institutions around the country, on Wednesday. As part of the settlement, WEX has agreed to pay the fine and will jointly pay the $31 million restitution with with Higher One, a Connecticut company that is affiliated with WEX Bank and provides disbursement services for students, according to the FDIC. Higher One has agreed to pay a $2.23 million penalty for its part in the deception.
“It is important that financial products offered to college students under the sponsorship of their universities are clear, transparent and trustworthy,” FDIC Chairman Martin J. Gruenberg said in statement. “Today’s action holds both the bank and its student card partner accountable for the practices related to the products they offered to college students and provides restitution to those students harmed by these practices.”
A call to WEX’s corporate spokeswoman was not returned Wednesday night.
The FDIC concluded that the Higher One website and associated materials, which were approved by WEX Bank, omitted facts about certain fees, features and limitations of its debit-card “OneAccount” product, which allows students to pay for things like books, supplies and living expenses after payment of tuition and other expenses owed directly to a college or university.
Specifically, the FDIC found that Higher One did not inform students that there were other options available besides the OneAccount, and did not provide a full and complete fee schedule or explain the availability of fee-free ATM services.
“As a result of these omissions, Higher One improperly collected $31 million in fees from students from May 4, 2012, to July 15, 2014,” the FDIC said.
WEX Bank has offered the OneAccount since May 4, 2012, according to the FDIC. Students who think they are owed restitution don’t need to take any action, the FDIC said. Eligible consumers will receive notifications once the restitution plans have been approved.
WEX Bank is a wholly owned subsidiary of WEX Inc., part of its payment processing division that handles corporate payments. The bank was created in 1998 and is based in Midvale, Utah.
Started in 1983 as a payment processor for companies with fleets of vehicles, WEX has expanded to offer global payment processing services to corporations, including the health care and travel industries.
In its last quarterly filing with the Securities and Exchange Commission, WEX reported revenue of $226 million. In 2014, it reported annual revenues of $817 million. It employs a global workforce of 2,000, with 700 of those employees in Maine.