The notorious revolving door between Congress and the industries it oversees has opened for a company that makes its money off student loans.
The controversial, New Haven-based Higher One, which has been criticized by politicians and consumer advocacy groups for onerous practices related its student debit cards, has poached a key staff member from one of its harshest congressional critics.
Joanna Serra, who was a legislative assistant and the primary staff member on education issues for liberal Democratic Sen. Richard Durbin, is now working in government affairs for Higher One. A representative for Durbin confirmed that Serra left in July. She started working at Higher One on July 15, a company representative told BuzzFeed.
Her responsibilities, according to a job listing posted by Higher One, include working "as a company representative for federal and state lobbying efforts and trade associations" and monitoring "state and federal legislative and regulatory issues."
Higher One's primary business is the disbursement of student financial aid and providing students with debit cards with financial aid money. Both Higher One's marketing of those debit cards — students often receive them without signing up or requesting them — and the fees associated with them, such as when PINs are used to make debit purchases or using non-Higher One ATMs, have been criticized by consumer groups, among them the U.S. Public Interest Research Group. HigherOne disburses financial aid on campuses with around 4.5 million students enrolled and has 2.2 account holders.
Messages left for Serra went unreturned.
Serra had worked with Durbin, who has been one of the more outspoken critics of Higher One, since 2011 as a senior education and domestic policy advisor. In July 2012, for instance, Durbin and George Miller wrote a letter to the inspector general of the Education Department, Kathleen Tighe, and Richard Cordray, the director of the Consumer Financial Protection Bureau, expressing their concern over "troubling practices with campus-based debit cards," ATM fees, the lack of on-campus ATMs, and the "close relationship between institutions and banks through co-branding of financial products." The letter specifically criticized Higher One for not having a high number of on-campus ATM machines where students could access their financial aid with no fee. The Durbin staffer listed at the end of the letter who the Education Department and the CFPB were supposed to contact was Joanna Serra.
Four days after the first letter, Sen. Durbin, along with Sen. Jack Reed and Rep. Peter Welch sent another one to 15 financial institutions, including Higher One, that called for several fees on campus debit cards and prepaid student aid refund cards to be eliminated. The letter also requested information on fees and arrangements between the financial institutions. The three lawmakers said they had "serious concerns about debit and prepaid card programs on college and university campuses."
Against that backdrop, the hiring of Serra is sure to raise eyebrows, despite Senate rules that prohibit her from lobbying Durbin and other former colleagues for at least a year. Indeed, the move by Higher One to put one of its Capitol Hill antagonists on the payroll is a tactic that has been employed by much larger Wall Street investment banks for years. The revolving door between Wall Street and the U.S. Securities and Exchange Commission, Federal Reserve, and Department of Justice, to name just a few agencies is a well-established, if somewhat unseemly, tradition.
For instance, Tom Koonce, who works in government affairs for JPMorgan Chase, was legislative director for Brad Miller, a former House Democrat who sat on the Financial Services Committee and Steven Cutler, a senior vice president and general counsel at the bank, was head of the enforcement division at the SEC from 2001 to 2005.
Although Higher One has come under scrutiny from a group of liberal senators and House members, one consumer advocate told BuzzFeed it is more likely to face new regulation from the Department of Education, which oversees financial aid, or the Consumer Financial Protection Bureau, the independent regulator of a wide range of consumer financial products.
In January, the Consumer Financial Protection Bureau started an inquiry into "the impact of financial products marketed to students through colleges and universities" and solicited comments from interested parties. Durbin and Miller < released a statement praising the Bureau for launching its inquiry. The CFPB received 161 comments — Higher One submitted a comment detailing its business that was over 50 pages long.
For its part, the FDIC reached a settlement with Higher One and one of its bank partners in April 2012 over large fees to students with overdrawn accounts. Higher One agreed to pay $11 million in restitution to affected students and a $110,000 civil penalty. After the settlement, Higher One changed its fee structure by introducing a debit card with a sole monthly fee as well as eliminating some other fees.
Higher One's revenue growth slowed in its most recent quarter thanks to the new reduced fee structure, which led to a 14% decrease in its revenue from checking accounts.
In a call with analysts following its earnings announcement, Higher One CEO Mark Volchek said that it was possible Higher One's business would be the subject of a "negotiated rule-making" with the Department of Education, adding that further rule-making on financial aid disbursement "may be addressed at a future time." Volchek described Higher One as being in a "regulated consumer business" and that "focus on compliance and regulation remains key for Higher One."
Perhaps that's why the company hired Serra. And perhaps it is also why Higher One keeps a lobbying group on retainer. So far this year, Higher One has paid $200,000 to the The Duberstein Group for lobbying the Senate, according to disclosure documents. One of the Duberstein Group lobbyists working for Higher One, Marti Thomas, was previously a lobbyist for Goldman Sachs after nearly 10 years working for former House Minority Leader Dick Gephardt and a stint at the Treasury Department.