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Higher One, the large but often controversial provider of debit cards on college campuses, has reached a preliminary agreement to pay $15 million to settle claims that its fees and marketing practices were predatory, the company announced Tuesday.

The settlement, if finalized and approved by a court, would resolve a handful of class-action lawsuits filed in 2012 against Higher One by a dozen students at colleges across the country. A federal judge consolidated the lawsuits filed in five different states -- Connecticut, Mississippi, Alabama, Illinois and Kentucky -- into one class action earlier this year.

At issue in the case were Higher One’s debit card accounts that the company provided to college students. Colleges and universities with agreements with Higher One disburse students’ financial aid reimbursements directly onto those cards, but some students have complained that the fees to use the cards are exorbitant and insufficiently transparent.

In their complaint against Higher One, the plaintiffs had alleged that the company was engaged in “unfair and unconscionable practices of automatically creating bank accounts for college students, depositing students’ financial aid funds into Higher One accounts without students’ permission, deceptively discouraging students from opting-out of such accounts, and assessing deceptive and unusual bank fees on student accounts.”

Both parties said Tuesday that they had reached an agreement “in principle” to resolve the case. Under the settlement, Higher One will pay $15 million and agree to change some of its practices or agree to maintain changes it has already made.

Students who had a One Account between March 2006 and August 2012 and who incurred a fee on their account would be eligible for payment under the settlement, according to a person familiar with the agreement. It would also require Higher One to stop charging certain fees and to maintain some changes it has already made to its fee structure.

The two sides still need to hammer out the details of the agreement and receive approval from the court before the settlement is finalized.

Higher One consumers who are deemed eligible for the settlement would see “substantial relief” under the agreement, said Hassan Zavareei, a partner at the Washington-based firm Tycko & Zavareei who was the lead lawyer for the plaintiffs.

“We are optimistic that we will have a final agreement to present to the court within the next 60 days,” Zavareei said.   

A spokeswoman for Higher One said in an email Tuesday evening that the company continues to believe the claims in the lawsuit are “without merit” but did not say whether the proposed settlement would include an admission of wrongdoing. The company had asked a federal judge to dismiss the case.

“Higher One has entered into this agreement in principle solely to avoid a lengthy and costly litigation process and to minimize business disruption in offering its valued services to students and institutions of higher education,” the spokeswoman, Shoba V. Lemoine, wrote. “This settlement, if finalized and approved, would resolve all outstanding civil litigation against Higher One involving the marketing and usage of its OneAccount suite.”

Lemoine said she could not provide further details because the company was negotiating with the plaintiffs over the settlement. Higher One disclosed to investors Tuesday that the settlement’s total cost to the company would be $16.4 million, including legal fees and other expenses.

Higher One has long dominated the market for financial products on college campuses but over the past several years has increasingly found itself under scrutiny from students, consumer advocates, regulators and lawmakers over some of its business practices.

The company has agreements to offer its products, usually debit cards that are co-branded with a university’s logo, at more than 500 campuses, according to a 2012 study by the U.S. Public Interest Research Group’s Education Fund. The group found that 900 colleges nationwide have agreements with banks or financial services companies for debit or prepaid cards for financial aid disbursement.

Last year, Higher One agreed to pay $11 million in restitution to students as part of a settlement with the Federal Deposit Insurance Corporation, which alleged that the company had violated federal law in the way it charged overdraft fees. The company did not admit any liability in the settlement.

Consumer Financial Protection Bureau officials last month said they were concerned about the arrangements that financial institutions like Higher One have with individual colleges. The agency’s seven-month inquiry into those contracts raised questions about whether the financial products were good deals for students and the extent to which colleges receive kickbacks for pushing the products.

A handful of Democratic lawmakers in the U.S. House and Senate are currently in the process of receiving responses to a letter they sent in September to nine major financial institutions -- including Higher One -- asking for them to explain their arrangements with colleges. The letter specifically requested the amount of fees that the financial services companies are collecting from students. The lawmakers said they were concerned that the arrangements are lucrative for banks and colleges but harm students by charging them exorbitant fees.

The Education Department has also announced that it plans to write new regulations about how federal student aid is disbursed to students on campus through debit cards and other financial products. The department has not said when such a rulemaking process would begin. 

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