Green Dot Settlement
In Re: Green Dot Corporation
Date: July 1, 2024
Issue: Green Dot Corporation’s consent order with the Federal Reserve (the Fed) to resolve unfair, or deceptive acts or practices (UDAP) allegations.
Case Summary: Green Dot agreed to pay $44 million to the Fed to resolve allegations claiming it engaged in UDAPs.
Green Dot is a registered bank holding company that owns and controls Green Dot Bank and various nonbank subsidiaries. The Federal Reserve Banks of San Francisco and Dallas examined Green Dot’s compliance risk management framework. According to the reserve banks, Green Dot engaged in UDAPs by maintaining a deficient consumer compliance risk management program. Additionally, the Fed and Federal Reserve Bank of San Francisco Bank reviewed 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.
First, the agencies asserted that from May 2020 to June 2020, the bank was deceptive in assessing fees on zero-balance accounts. The reserve banks claimed the bank’s prepaid debit card packaging, cardholder agreements, and online disclosures declared accounts would close when consumers spent their account balances down to zero dollars. Yet many accounts remained open despite having a zero-dollar account balance, which caused consumers to incur monthly fees.
Second, the agencies alleged that from June 2019 to December 2020, the Bank acted deceptively by making representations in its GPR prepaid debit card packaging, point-of-sale advertising, and online disclosures that consumers could register their prepaid debit card accounts by telephone or online. The agencies claimed, however, that consumers could only register their accounts online. According to the agencies, the bank discontinued the telephonic registration option without updating the card packaging, which prevented customers who lacked internet access from registering and using their cards.
Third, the agencies alleged from May 2020 to June 2020, the bank acted unfairly by not allowing its customers to cure account blocks. The agencies also claimed the customers could not access their funds in their GPR prepaid debit cards receiving Washington state unemployment insurance benefits.
Fourth, the agencies alleged from August 2020 to September 2020, a third-party payment processor caused the bank to engage in an unfair act. According to the agencies, the processor failed to timely release extended authorization holds in connection with GPR prepaid debit card transactions made by consumers until several days after the settlement of the transaction. As a result, consumers were denied access to their funds, and their account balances were reduced.
Finally, the agencies alleged Green Dot engaged in a deceptive practice when its nonbank subsidiary did not clearly disclose the full cost of its tax refund processing fee to a major tax preparer’s customers. Green Dot handled disclosing its fees on the major tax preparer’s website, which offered customers the option to “pay nothing out of pocket” by deducting the tax preparation fee from their refund amount. However, the agencies alleged the website did not clearly and conspicuously disclose whether customers also needed to pay a separate tax refund processing fee.
Along with paying $44 million to the Fed, Green Dot agreed to submit a written, revised Bank Secrecy Act/anti-money laundering compliance program acceptable to the San Francisco Reserve Bank. Green Dot will also submit a written program for monitoring and reporting suspicious activity.
Bottom Line: Green Dot did not admit to or deny the Fed’s allegations.
Document: Consent Order
