NetSpend 2011 Annual Report Download - page 11

Table of Contents
MetaBank, which has been one of our Issuing Banks since 2005, is a federal savings bank that is a leading issuer of prepaid debit cards. In
January 2010, we amended our agreement with MetaBank and, in order to further align our strategic interests with MetaBank, we also acquired
approximately 4.9% of the outstanding equity interests in Meta Financial Group, Inc., MetaBank's holding company.
In July 2011, MetaBank publicly disclosed that it stipulated and consented to a Cease and Desist Order (the "Order") issued by the Office
of Thrift Supervision ("OTS"), now the Office of the Comptroller of the Currency ("OCC"). Under the Order, MetaBank remains subject to the
Supervisory Directives issued by the OTS (the "OTS Directives") in October 2010. Under the OTS Directives, MetaBank is required to obtain
the written approval of the OCC prior to, among other things, entering into any new third party agency agreements concerning any credit or
deposit product (including prepaid access) or materially amending any such existing agreement.
We understand that the OTS Directives require MetaBank to obtain OCC approval prior to MetaBank executing third party agency
agreements with new distributors for its existing program managers, including NetSpend. This means that we remain unable, without
MetaBank obtaining the prior written approval of OCC, to enter into new agreements with distributors that are also required to enter into third
party agency agreements with MetaBank. This restriction includes any retail distributors that have the capability to distribute cards issued by
MetaBank and accept funds to be loaded onto those cards. Our programs that do not involve retail distributors that accept funds to be loaded
onto cards, such as our direct-to-consumer and online marketing programs and our non-standard auto insurance marketing relationships, do not
require third party agency agreements with our Issuing Banks. Similarly, as a general matter, extensions or renewals of our existing distributor
agreements do not require new or amended third party agency agreements to be executed with our Issuing Banks, including MetaBank.
Therefore, MetaBank is able to continue to operate within its existing third party agreements, including our card program management
agreement, and to maintain its existing agency agreements with our distributors. We are actively pursuing our own money transmitter licenses
in the jurisdictions where we do not currently have them in order to reduce our dependence on the ability of our Issuing Banks to enter into
agency relationships with proposed new distributors. We currently have money transmitter licenses in 30 jurisdictions and applications pending
in 17 jurisdictions. Our goal is to acquire licenses in all of the jurisdictions where our current or expected activities, or the activities of our
distributors or reload partners, require licenses.
We are pursuing a bank diversification strategy pursuant to which we intend to distribute our card issuing activities across at least three
Issuing Banks, in addition to the banks that issue our payroll cards. We are focused on doing so in a manner that balances our diversification
strategy with the protection of existing cardholder and direct deposit relationships and other operational considerations. In furtherance of this
strategy we entered into an agreement with The Bancorp Bank ("Bancorp") in January 2011 pursuant to which Bancorp will serve as an Issuing
Bank for our new and existing card programs. Bancorp began issuing our cards in a pilot program in April 2011 and began issuing cards as part
of a more expanded commercial roll-out in October 2011. Our PayPal branded card will be issued by Bancorp. We are also continuing our
discussions with other prospective Issuing Banks.
In May 2011, we amended our agreement with Inter National Bank ("INB") to extend the date by which we agreed to transition the GPR
cards issued by INB to another bank from July 2011 to September 2011. We are in the process of transitioning the distributors of cards issued
by INB to another Issuing Bank and we are currently operating under the wind-down provisions of our agreement with INB.
U.S. Bank ("USB") and SunTrust Bank ("SunTrust") act as issuers of our payroll cards. We are actively seeking to transfer the USB
portfolio to another issuing bank and we currently expect to complete this transition in 2012. Our current contract with SunTrust automatically
renewed for one year at the end of 2011, although SunTrust maintains that it has a continuing right to terminate its contract
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