Federal Reserve Fines Green Dot $44 Million for Unfair and Deceptive Practices

The Federal Reserve Board of Governors has fined financial technology and bank holding company Green Dot $44 million for numerous unfair and deceptive practices and a deficient consumer compliance risk management program. The Fed's press release on Friday alleged that Green Dot failed to adequately disclose the tax refund processing fee for services offered on a third party’s website, blocked access to accounts of legitimate customers receiving unemployment benefits, lacked reasonable policies and procedures to help customers address account blocks, and did not maintain effective consumer compliance risk management or Bank Secrecy Act/anti-money laundering (BSA/AML) programs.

Green Dot had estimated in March that it would pay between $20 to $50 million to resolve liabilities related to the alleged misconduct. The Fed has ordered the company to implement specific compliance measures, including hiring an independent third party to strengthen its consumer compliance risk management program.

From November 2017 to January 2021, Green Dot allegedly misrepresented how certain accounts would be closed after being withdrawn to zero, when in fact, many accounts remained open with consumers incurring monthly fees, according to the company’s consent order. Additionally, from June 2019 to December 2020, the company misrepresented that consumers could register prepaid debit card accounts by telephone or online, when in fact, they could only register accounts online, the Fed alleged. From January 2017 to December 2022, a third-party tax preparer contracting with Green Dot allegedly failed to disclose the full cost of their tax refund processing fee.

The Fed has ordered Green Dot to implement an effective AML program and hire an independent third party to conduct a review of certain transaction activities. Within 90 days, Green Dot must submit a written revised BSA/AML compliance program and implement proper suspicious activity monitoring and reporting, according to the order.

On Friday, four banking regulators, including the Fed, joined the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) in proposing additional AML risk assessments as part of the largest update to the BSA in decades, as reported by FinCEN.

In response, Green Dot CEO George Gresham stated on the company’s website that they are “pleased to confirm the consent order has been finalized.” He added, “[W]e have taken and will continue taking meaningful steps to correct and remediate … issues, including significant updates to our processes, our product packaging and marketing, our management team, and our compliance programs.” Gresham emphasized the company’s commitment to cooperating with regulators to address and comply with all concerns noted in the consent order, ensuring that customers are well-served and protected on an ongoing basis.

Green Dot agreed to the order without admitting or denying the Fed’s allegations.

By fLEXI tEAM