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Table of Contents
NetSpend Holdings, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 2011, 2010 and 2009
NOTE 17: COMMITMENTS AND CONTINGENCIES (Continued)
Operations for the year ended December 31, 2010. As of December 31, 2011, $0.4 million was remaining in accrued expenses on the
Consolidated Balance Sheets.
As of December 31, 2011, future minimum commitments under non-cancelable service agreements are as follows:
Guarantees
A significant portion of the Company's business is conducted through retail distributors that provide load and reload services to
cardholders at their locations. Members of the Company's distribution and reload network collect cardholders' funds and remit them by
electronic transfer to the Issuing Banks for deposit in the cardholder accounts. The Company's Issuing Banks typically receive cardholders'
funds no earlier than three business days after they are collected by the retailer. If any retailer fails to remit cardholders' funds to the Company's
Issuing Banks, the Company typically reimburses the Issuing Banks for the shortfall created thereby. The Company manages the risk
associated with this process through a formalized set of credit standards, volume limits and deposit requirements for certain retailers and by
typically maintaining the right to offset any settlement shortfall against the commissions payable to the relevant retailer. To date, the Company
has not experienced any significant losses associated with settlement failures and the Company had not recorded a settlement guarantee liability
as of December 31, 2011 or December 31, 2010. As of December 31, 2011 and December 31, 2010, the Company's estimated gross settlement
exposure was $17.1 million and $13.9 million, respectively.
Cardholders can in some circumstances incur charges in excess of the funds available in their accounts and are liable for the resulting
overdrawn account balance. Although the Company generally declines authorization attempts for amounts that exceed the available balance in
a cardholder's account, the application of the Networks' rules and regulations, the timing of the settlement of transactions and the assessment of
subscription, maintenance or other fees can, among other things, result in overdrawn card accounts. The Company also provides, as a courtesy
and in its discretion, certain cardholders with a "cushion" that allows them to overdraw their card accounts by up to $10. In addition, eligible
cardholders may enroll in the Issuing Banks' overdraft protection programs and fund transactions that exceed the available balance in their
accounts. The Company generally provides the funds used as part of this overdraft program (MetaBank will advance the first $1.0 million on
behalf of its cardholders) and is responsible to the Issuing Banks for any losses associated with any overdrawn account balances. As of
December 31, 2011 and 2010, cardholders' overdrawn account balances totaled $9.0 million and
97
(in thousands of dollars)
2012
$
15,013
2013
10,992
2014
6,612
2015
2,819
2016
—
Thereafter
—
Total minimum payments
$
35,436