What: Shares of Higher One Holdings, Inc. (NYSE:ONE) fell 14% after the company's latest quarterly SEC filing disclosed that the Federal Reserve is seeking penalties against it, which could cause it to default on a loan.
So what: According to the filing, on May 9 the Federal Reserve advised Higher One that it is seeking an administrative order against the company for violations of the Federal Trade Commission Act. Specifically, the order stems from Higher One's "marketing and disclosure practices related to the process by which students may select the OneAccount option for financial aid refund."
Higher One is in discussions with the Federal Reserve's board of governors regarding the matter. Because the situation is in its early stages, however, Higher One says the final amounts of any resulting restitution demands are "impossible to predict." As a result, Higher One admits that "it is possible the amounts could reach levels that would cause an event of default under our Credit Facility."
Now what: The news also comes on the heels of Higher One's better-than-expected first-quarter results last Thursday, which had me reconsidering whether shares were finally worth a deeper look following uncertainties regarding regulatory scrutiny this year. For now, and until we receive more clarity on the size of the penalties Higher One is facing, my feet will remain firmly planted on the sidelines.
Your credit card may soon be completely worthless
Speaking of payment options, the plastic in your wallet is about to go the way of the typewriter, the VCR, and the 8-track tape player. When it does, a handful of investors could stand to get very rich. You can join them -- but you must act now. An eye-opening new presentation reveals the full story on why your credit card is about to be worthless -- and highlights one little-known company sitting at the epicenter of an earth-shaking movement that could hand early investors the kind of profits we haven't seen since the dot-com days. Click here to watch this stunning video.
Steve Symington and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.