Green Dot Fined $44 Million by Federal Reserve for Consumer Harm: Failures in Disclosures, Account Management, and Tax Refund Fees

Austin, Utah or Texas United States of America
Company required to hire independent third-party for consumer compliance risk management program and develop effective anti-money laundering program
Federal Reserve identified instances of these practices from 2017 to December 2022
Green Dot Corp. fined $44 million by Federal Reserve for consumer harm
Green Dot stock price dropped following the announcement of the fine
Violations included failing to disclose fees, keeping open accounts after consumers spent balances, and offering inadequate ways for customers to redress situations
Green Dot Fined $44 Million by Federal Reserve for Consumer Harm: Failures in Disclosures, Account Management, and Tax Refund Fees

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.



Confidence

91%

Doubts
  • Was the fine proportionate to the severity of the violations?
  • Were all instances of non-compliance identified?

Sources

100%

  • Unique Points
    • Green Dot failed to properly close accounts and assessing fees on them.
    • Green Dot denied certain customers access to funds while offering inadequate ways for those customers to redress the situation.
    • Green Dot failed to notify customers that they could no longer register debit cards by phone after the company discontinued that service.
    • Green Dot failed to properly disclose the fee it charged while partnering on tax-refund deposits with TurboTax.
  • Accuracy
    No Contradictions at Time Of Publication
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (0%)
    None Found At Time Of Publication

98%

  • Unique Points
    • Green Dot agreed to pay a $44 million fine imposed by the Federal Reserve.
    • Green Dot failed to adequately disclose the tax refund processing fee for tax preparation services offered on a third party’s website.
  • Accuracy
    • Green Dot violated consumer law in marketing, selling, and servicing of prepaid debit card products and tax return preparation payment services.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication

94%

  • Unique Points
    • Green Dot was fined $44 million by the Federal Reserve for numerous failures that harmed consumers over a period of at least five years.
    • Green Dot failed to properly disclose the fee it charged while partnering on tax-refund deposits with TurboTax in one of the articles.
  • Accuracy
    • Green Dot failed to properly close accounts and assessed fees on them.
    • Green Dot denied certain customers access to funds while offering inadequate ways for those customers to redress the situation.
    • Green Dot failed to notify customers that they could no longer register debit cards by phone after the company discontinued that service.
    • Green Dot failed to properly disclose the fee it charged while partnering on tax-refund deposits with TurboTax.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (0%)
    None Found At Time Of Publication

81%

  • Unique Points
    • Green Dot, the world's largest prepaid debit card company, is accused of concealing critical information about its declining prepaid card business from shareholders.
    • Former director of quality engineering and current shareholder Dino DiBlasio alleges that executives and directors knew their anti-money laundering controls weren't up to par but continued to operate with them, resulting in a costly consent order from the Federal Reserve.
    • The lawsuit claims that founder and former CEO Steven Streit and former CFO Mark Shifke inflated Green Dot's price long enough to sell $62 million of their own shares at artificially inflated prices.
    • In 2018 and 2019, the company's prepaid card business faced decline; when this was disclosed, Green Dot's stock price dropped.
  • Accuracy
    • Green Dot is accused of concealing critical information about its declining prepaid card business from shareholders.
    • The lawsuit claims that founder and former CEO Steven Streit and former CFO Mark Shifke inflated Green Dot’s price long enough to sell $62 million of their own shares at artificially inflated prices.
    • Green Dot is known for its digital banking partnership with Walmart and operates a banking-as-a-service platform, as well as having numerous co-branded card partnerships.
  • Deception (30%)
    The article is moderately deceiving due to selective reporting and editorializing. The author presents only one side of the story, focusing on the allegations made by the former employee and shareholder without disclosing that Green Dot has disputed these claims. Additionally, there is an instance of emotional manipulation through the use of words like 'misled', 'inflated', and 'concealed' to paint a negative picture of the company executives.
    • ...executives and directors knew that the firm’s anti-money laundering controls weren’t up to snuff but continued to operate with them anyway...
    • Leaders at Green Dot concealed critical information about the bank’s declining prepaid card business from shareholders...
  • Fallacies (85%)
    The article contains a few instances of appeals to authority and inflammatory rhetoric. It heavily quotes the allegations made by a former employee and current shareholder, Dino DiBlasio, without providing counter-arguments or statements from the accused parties. The author uses inflammatory language such as
    • Leaders at Green Dot concealed critical information about the bank’s declining prepaid card business...
    • ...former CEO Dan Henry and current CEO George Gresham.
    • Defendants perpetuated their scheme by continuing to mislead investors...
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication

96%

  • Unique Points
    • Green Dot allegedly told consumers that their prepaid debit card accounts would be closed after they spent their balances down to zero but kept them open and continued to charge monthly fees.
    • Green Dot works with retail outlets including Apple, Walmart, Amazon, and CVS Pharmacy.
  • Accuracy
    • Green Dot failed to properly disclose the fee it charged while partnering on tax-refund deposits with TurboTax.
  • Deception (100%)
    None Found At Time Of Publication
  • Fallacies (100%)
    None Found At Time Of Publication
  • Bias (100%)
    None Found At Time Of Publication
  • Site Conflicts Of Interest (100%)
    None Found At Time Of Publication
  • Author Conflicts Of Interest (100%)
    None Found At Time Of Publication