Green Dot fined $44M for UDAP violations and deficient compliance program

Green Dot Corporation, Austin, Texas, is a registered bank holding company that owns and controls Green Dot Bank, Provo, Utah, (the “Bank”) a state member bank, and various nonbank subsidiaries (collectively, “Green Dot”).

Examinations of Green Dot by the Federal Reserve Banks of San Francisco and Dallas, identified certain significant deficiencies relating to Green Dot’s compliance risk management framework, including, but not limited to deficiencies in consumer compliance and compliance with applicable federal and state laws, rules, and regulations relating to anti-money laundering (“AML”) compliance, including the Bank Secrecy Act (“BSA”) (31 U.S.C. § 5311 et seq.); the rules and regulations issued thereunder by the U.S. Department of the Treasury (31 C.F.R. Chapter X); and the requirements of Regulation H of the Board of Governors to report suspicious activity and to maintain an adequate BSA/AML compliance program (12 C.F.R. §§ 208.62 and 208.63) (collectively, the “BSA/AML Requirements”).

Also, following the submission of consumer complaints, the Board of Governors and the San Francisco Reserve Bank conducted a review of Green Dot’s practices related to the marketing, selling, and servicing of general purpose reloadable (“GPR”) prepaid debit card accounts and Green Dot’s offering of tax return preparation payment services with a third party that have revealed certain consumer compliance deficiencies resulting in unfair or deceptive acts or practices in or affecting commerce, within the meaning of section 5(a)(1) of the Federal Trade Commission Act (“FTC Act”) (15 U.S.C. § 45(a)(1)), and unsafe or unsound practices:

• Assessment of fees on zero balance accounts
• Misrepresentations that consumers could register their GPR prepaid credit card accounts by telephone (Green Dot had discontinued telephonic registration without updating the card packaging, preventing consumers without internet access (the remaining channel for card registration) from registering and using their cards
• Blocking access to prepaid card accounts without reasonable policies and procedures
• Maintaining extended authorization holds (due to a third-party processor's data migration error)
• Failing to disclose clearly and conspicuously tax return preparation payment services fees of a major third-party tax preparer