Green Dot Corp., a financial services company that partners with major retailers like Walmart and Apple, has been fined $44 million by the Federal Reserve for numerous failures that harmed consumers over a period of at least five years. The violations included failing to properly disclose fees, keeping open accounts after consumers had spent their balances, and offering inadequate ways for customers to redress the situation.
According to reports from NBC News and Fortune, Green Dot also failed to adequately disclose tax refund processing fees for tax preparation services offered on third-party websites. The Federal Reserve identified instances of these practices starting in 2017 and continuing through December 2022.
Green Dot's stock price dropped following the announcement of the fine, which does not place any restrictions on the bank's ability to serve its existing clients. The company has stated that it is committed to cooperating with regulators and taking steps to correct and remediate these issues.
The Federal Reserve Board is requiring Green Dot to hire an independent third-party to strengthen its consumer compliance risk management program, develop an effective anti-money laundering program, and hire another independent third-party for a review of certain transaction activities.
Green Dot's financial analysts estimate that the fine will reduce earnings per share by between $0.35 and $0.44, depending on tax deductibility.
Green Dot is not the only company in the prepaid debit card industry facing regulatory scrutiny. In a separate lawsuit, former Green Dot executives are accused of misleading shareholders about the declining business by concealing critical information and inflating stock prices to sell their own shares at artificially inflated prices.
The decline in Green Dot's prepaid card business has been attributed to new competition from companies like PayPal, Venmo, and neobanks like Chime. The Federal Reserve's consent order also required Green Dot to address concerns related to anti-money laundering controls.