“Unfair and deceptive” according to the Board of Governors of the Federal Reserve System is how Green Dot Bank and Green Dot Corporation are described in the finding. Find the full report below.
Key points include:
- Compliance Issues: Examinations identified deficiencies in Green Dot’s compliance risk management, particularly regarding consumer compliance and anti-money laundering (AML) requirements.
- Unfair Practices:
- Fees on Zero Balance Accounts: Green Dot misrepresented that accounts would be closed at zero balance, but fees continued.
- Card Registration Issues: Green Dot discontinued telephonic registration of prepaid cards without updating disclosures, causing issues for consumers without internet access.
- Blocking Access: Legitimate customers had trouble accessing unemployment benefits on their prepaid cards.
- Authorization Holds: Extended holds on funds due to processing errors.
- Undisclosed Tax Fees: A subsidiary failed to clearly disclose fees for tax refund processing.
- Corrective Actions: Green Dot is required to enhance its compliance programs, correct deceptive practices, and submit plans to ensure future compliance. A civil penalty of $44 million was imposed, and ongoing oversight will ensure adherence to the corrective measures.
This order addresses both consumer protection laws and AML obligations, ensuring stronger oversight and transparency in Green Dot’s operations.
The next steps outlined in the enforcement action for Green Dot Bank and Green Dot Corporation involve several corrective actions and ongoing oversight measures. These steps are designed to address deficiencies in their compliance programs and consumer protection practices. Here’s a summary of the next steps:
- Revise BSA/AML Compliance Program:
- Within 90 days, Green Dot must submit a revised anti-money laundering (AML) compliance program that includes internal controls, risk assessment, and enhanced training for personnel.
- Suspicious Activity Monitoring Program:
- Within 90 days, Green Dot must develop a program to ensure timely and accurate reporting of suspicious transactions. This includes improving the monitoring system for customer accounts and transactions.
- Transaction Review:
- Green Dot must engage an independent third party within 30 days to review transactions from August 2021 to October 2022. The review ensures that suspicious activities were properly identified and reported.
- Consumer Compliance Board Oversight Plan:
- Within 90 days, the board of directors must submit a plan to improve its oversight of Green Dot’s consumer compliance risk management.
- Consumer Compliance Risk Management Plan:
- Green Dot must retain an independent consultant within 60 days to help develop a plan to enhance its compliance with consumer protection laws.
- Corrective Actions on Misleading Practices:
- Green Dot must continue efforts to prevent violations of consumer protection laws, correct any misleading or deceptive practices, and maintain compliance with the FTC Act (Section 5).
- Submit Engagement Letters, Plans, and Programs:
- Green Dot must submit the required engagement letters, plans, and programs to the Federal Reserve Bank of San Francisco within the specified timelines. These documents must outline the implementation of the corrective actions.
- Progress Reports:
- Green Dot’s board must submit quarterly progress reports to the Federal Reserve, detailing the steps taken to comply with the enforcement order and the results achieved.
- Civil Money Penalty:
- Green Dot must pay a civil money penalty of $44 million immediately via Fedwire transfer to the Federal Reserve, which will be distributed to the U.S. Treasury.
- Communication and Disclosure:
- Green Dot must provide a copy of the enforcement order to third-party service providers and any new partners before entering into contracts, ensuring awareness of compliance obligations.
By following these steps, Green Dot is expected to enhance its compliance infrastructure and consumer protection measures under close oversight from the Federal Reserve.
Full report
