The Federal Reserve Board fined Green Dot $44 million on Friday, alleging deceptive practices and a deficient risk management program.

According to the Fed, Green Dot violated laws in its marketing, selling and servicing of prepaid debit card products. The bank also allegedly broke laws between 2017 and 2022 through its offering of tax return preparation payment services, including by failing to adequately disclose refund processing fees.

In a prepared statement following the Fed’s announcement of the consent order, Green Dot CEO George Gresham repeated the company’s previous assertion that the order relates to issues from years prior.

“[W]e have taken and will continue taking meaningful steps to correct and remediate those issues, including significant updates to our processes, our product packaging and marketing, our management team and our compliance programs,” Gresham wrote. “We are committed to cooperating and partnering closely with our regulators to ensure all concerns noted in the consent order are addressed and complied with and that our customers are well-served and protected on an ongoing basis.”

“As stewards of our customers’ valued resources, we take this commitment and responsibility very seriously,” he added.

In the consent order, the Fed alleged that Green Dot misrepresented the fees on its reloadable debit card products between 2017 and 2021, saying that accounts would be closed when customers hit zero dollars. These accounts weren’t closed and therefore incurred fees.

The Fed also said that Green Dot blocked customers receiving unemployment benefits from accessing their accounts in May and June 2020 and, in addition, didn’t have policies and procedures in place to help those customers rectify the issue.

In accordance with the consent order, Green Dot must hire a third-party to review its transaction monitoring history from Aug. 1, 2021 through Oct. 31, 2022 to determine if suspicious activity conducted through the bank was properly identified and reported; and the bank must then report the results of the review to the San Francisco Fed.

It also must create and submit a plan to improve board oversight of its consumer compliance risk management program to the San Francisco Fed within 90 days; and must develop and submit a revised Bank Secrecy Act/Anti-Money Laundering compliance program.

Gresham said in a prepared statement that the bank “remain[s] optimistic about our financial and regulatory positions as well as our future growth potential and opportunity as we serve and empower customers directly and through our partners.”

The consent order follows a lawsuit filed last week by former employee Dino DiBlasio, former Green Dot employee, who alleged that company leaders misrepresented how an important line of business was performing and were aware of issues that would lead to an expensive Fed consent order.

Green Dot declined to comment on the lawsuit last week.

By Gabrielle Saulsbery on July 23, 2024
Original link