July 01--The Federal Reserve on Tuesday levied a $3.5 million penalty against Chicago-based Cole Taylor Bank over accusations of deceptive practices related to its checking accounts for college students.
In May, Rosemont-based Taylor Capital Group, parent of Cole Taylor, disclosed that it was likely to face civil penalties of up to $3.6 million through a partnership it had with Connecticut-based Higher One, which offers financial services to students who receive financial aid. From May 2012 to August 2013, Cole Taylor provided deposit accounts for Higher One.
"Higher One, under Cole Taylor's oversight," had "misled" students about what was called the "OneAccount," including not disclosing various fees or where it could find free ATMs.
Although Higher One is addressing its practices and must pay restitution, Cole Taylor is required to assume "backup liability" of up to $30 million should Higher One be unable to pay restitution.
The Federal Reserve Bank of Chicago had earlier told Cole Taylor that it had engaged in a "deceptive practice" related to the checking account opening process, and that the staff would take action.
Taylor Capital also disclosed earlier that it might be forced to make restitution of unknown amounts to affected account holders.
Separately, the Fed also has approved the acquisition of Taylor Capital by MB Financial.
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