The Federal Reserve Board on Friday issued an enforcement action against Green Dot Bank and its holding company, Green Dot Corporation, citing significant compliance deficiencies. This action aims to address and rectify various consumer compliance and anti-money laundering (AML) issues identified in recent examinations. Under the terms of the action, Green Dot will pay $44 million.
Specific Violations:
- Assessment of Fees on Zero Balance Accounts: Misrepresentation of account closure procedures, leading to continued monthly fees on zero-balance accounts.
- Telephone Registration of Prepaid Debit Card Accounts: Failure to update disclosures about telephonic registration options, misleading customers.
- Blocking Access to Prepaid Card Accounts: Inadequate policies for unblocking legitimate customer accounts, particularly those receiving Washington state unemployment insurance benefits.
- Extended Authorization Holds: Delayed release of holds on prepaid debit card transactions due to a third-party processor error, impacting consumers’ access to funds.
- Tax Return Preparation Payment Services Fees: Lack of clear disclosure regarding additional processing fees for tax refund services.
Enforcement Actions Ordered:
- Enhanced Compliance Programs: Green Dot must submit revised BSA/AML compliance programs and consumer compliance risk management plans within specified timeframes.
- Independent Transaction Review: An independent third party will conduct a review of Green Dot’s transaction monitoring from August 2021 to October 2022 to identify any unreported suspicious activities.
- No Misrepresentations: Green Dot must correct and prevent any misleading or deceptive practices and ensure compliance with consumer protection laws.
What They Said: “As we shared previously, the order relates to practices in place years ago, and we 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,” said George Gresham, director, CEO and president of Green Dot.
