MoneyGram 2009 Annual Report Download - page 688

Section 4.12 1
Compliance with Laws 1
(i)
1. Holdco is cooperating with Civil Investigative Demands by ten State Attorney General Offices regarding a potential agreement relating to efforts to
combat consumer fraud. MoneyGram Payment Systems, Inc. ("MoneyGram") has finalized a draft agreement with the Executive Committee for the
States Attorneys General, which has been circulated to all States for review and approval. The agreement provides that MoneyGram will provide
consumers with fraud warnings, make other changes to certain business practices, and increase its training of agents on the issue of consumer fraud.
MoneyGram will also contribute $1.1 million to a consumer education program sponsored by AARP (half in 2007/half in 2008) and pay the States
$150,000 for their costs. CA, CO, FL, NE, PA and TN have objected to the release language and/or are refusing to sign the agreement. Holdco plans to
continue to work to obtain an agreement that a sufficient number of states will agree to sign.
2. On January 11, 2007, Holdco received a Civil Investigative Demand from the FTC. The FTC requested information regarding fraud-induced money
transfers from the United States to Canada. The FTC initially informed Holdco that it is not the target of the investigation. Holdco is cooperating with
the FTC and provided documents and information in March 2007, as well as several supplemental productions in response to demands. On December 5,
2007, counsel for Holdco received a letter from the FTC stating that it is the subject of an investigation relating to fraud-induced money transfers.
3. MoneyGram Payment Systems, Inc. (MoneyGram) is subject to licensing laws and regulations in the states where its business activity is licensed. As of
December 31, 2007, MoneyGram believed it was in compliance with all state licensing laws and regulations, with the exception of the California
tangible net worth requirement. Holdco has notified the California Department of Financial Institutions ("DFI") of its non-compliance with the tangible
net worth requirement, and more recently of MoneyGram's failure to meet the DFI's 105% test for permissible investments as of January 31, 2008. The
DFI has advised MoneyGram that it does not intend to take enforcement action against MoneyGram at this time but said it reserves the right to do so in
the future after the Investment is complete.
4. MoneyGram Payment Systems, Inc. (MoneyGram) is subject to New York banking law §652-b which provides that it shall be unlawful for any
transmitter of money or its officers, affiliates or subsidiaries to enter into an agreement with a licensed check casher, whereby credit is extended to the
check casher at the same time as, and on the condition that, the transmitter of money enters into an agreement with the check casher whereby the check
casher will (1) sell only the New York instruments or New York traveler's checks of the transmitter of money or (2) agree to the exclusive use of any of
the other services of the transmitter of money. MoneyGram has from time to time provided loans to its check casher agents and in some instances these
loans were entered into at the same time that an exclusive arrangement for the sale of Holdco's money orders and/or money transfer services was
executed. There are currently loans outstanding with 14 agents in the
1 The appearance of [ * ] denote confidential information that has been omitted from this Exhibit and filed separately with the SEC pursuant to a
confidential treatment request under Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
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