Higher One, Inc. Enforcement Actions Remind Nonbank Service Providers of Their Legal Obligations When Partnering With Banks

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On December 23, 2015, the Federal Reserve Board (“Federal Reserve”) and the Federal Deposit Insurance Corp. (“FDIC” and, collectively with the Federal Reserve, the “Agencies”) announced settlements with Higher One, Inc. (“Higher One”) for alleged violations of the prohibition against deceptive acts and practices under Section 5 of the Federal Trade Commission Act (“FTC Act”). In conjunction with its Higher One settlement, the FDIC also announced a settlement with WEX Bank (“WEX”), an insured depository institution that partnered with Higher One to offer a financial aid refund program.

These parallel enforcement actions are a reminder that the federal banking agencies, as well as the Consumer Financial Protection Bureau (“CFPB”), may have both the authority and the appetite to hold nonbank service providers responsible for compliance with federal consumer protection laws.

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