On July 19, 2024, the Federal Reserve Board took action to address consumer compliance breakdowns by Green Dot, fining the firm $44 million for numerous unfair and deceptive practices and a deficient consumer compliance risk management program. According to the Federal Reserve Board’s press release, Green Dot violated consumer law in its marketing, selling, and servicing of prepaid debit card products, and its offering of tax return preparation payment services.
Green Dot Corporation is a registered bank holding company that owns and controls Green Dot Bank, a state member bank, and various nonbank subsidiaries. Examinations of Green Dot conducted by the Federal Reserve Bank 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 compliance, including the Bank Secrecy Act’s suspicious activity reporting.
In addition, the Federal Reserve found after reviewing Green Dot’s s practices related to the marketing, selling, and servicing of general purpose reloadable prepaid debit card accounts and Green Dot’s offering of tax return preparation payment services with a third party, that the Bank engaged in unfair or deceptive acts or practices. In particular, it was found that Green Dot:
Assessed fees on zero balance accounts. From November 2017 through January 2021, the Bank engaged in a deceptive act or practice by misrepresenting through GPR prepaid debit card packaging, cardholder agreements, and online disclosures that such accounts would be closed after consumers spent their account balances down to zero dollars when, in fact, many accounts remained open despite having a zero-dollar account balance and those consumers continued to incur monthly fees.
Misrepresented that Prepaid Debit Card Accounts can be registered through telephone. From June 2019 through December 2020, the Bank engaged in a deceptive act or practice by misrepresenting through GPR prepaid debit card packaging, point-of-sale advertising and online disclosures that consumers could register their GPR prepaid debit card accounts by telephone or online when, in fact, consumers could not register the cards telephonically and only could register their accounts online.
Blocked access to Prepaid Card Accounts without reasonable policies and procedures. From May 2020 through June 2020, the Bank engaged in unfair acts or practices through its lack of reasonable policies and procedures to permit the Bank’s legitimate customers to cure account blocks and obtain access to their funds in their GPR prepaid debit card accounts receiving Washington state unemployment insurance benefits.
Extended authorization holds. From August 2020 through at least September 2020, due to a third-party payment processor’s data migration error, the Bank engaged in an unfair act or practice by failing to timely release extended authorization holds in connection with certain GPR prepaid debit card transactions made by consumers (including at gas station point-of-sale terminals) until several days after the settlement of the transactions, thereby reducing available account balances and denying consumers access to their funds.
Failed to disclose tax return preparation payment services fees. From January 2017 through December 2022, Santa Barbara Tax Products Group (“TPG”), a wholly owned nonbank subsidiary of the Holding Company that has contracted with a third party, a major tax preparer, to offer tax return preparation payment services to the major tax preparer’s customers, engaged in a deceptive act or practice by failing to disclose clearly and conspicuously to the major tax preparer’s customers the full cost of their tax refund processing fee.
In addition to the $44 million fine, the Board is requiring the firm to take several steps to improve its BSA/AML compliance programs and address the root causes of consumer complaints.
Read the Federal Reserve Board’s press release here.
The Order can be found here.