NetSpend 2011 Annual Report Download - page 23

Table of Contents
The final rule to be adopted by the Department of Treasury could prevent us from loading federal benefits directly on to our cards.
In January 2011 the Department of the Treasury issued an interim final rule that would prohibit the electronic deposit of federal benefits,
wages and tax refunds to prepaid debit cards that do not meet certain criteria, including one that requires that the card not have an attached line
of credit or loan feature that triggers automatic repayment from the card. The cardholder must also be afforded all of the consumer protections
that apply to a payroll card. The public comment period for the rule expired in April 2011. Although we believe that our GPR cards comply
with the interim final rule in all respects, the Department of the Treasury could change the rule in light of the comments it receives during the
public comment period in a manner that would limit or prohibit the electronic deposit of federal benefits, wages and tax refunds onto our GPR
cards, which would result in a material adverse impact on our revenues.
Our card programs are subject to strict regulation under federal law regarding anti-money laundering and anti-terrorist financing. Failure
to comply with such laws, or abuse of our card programs for purposes of money laundering or terrorist financing, could have a material
adverse impact on our business.
Provisions of the USA PATRIOT Act, the Bank Secrecy Act and other federal laws impose substantial regulations on financial institutions
that are designed to prevent money laundering and the financing of terrorist organizations. Increasing regulatory scrutiny of our industry with
respect to money laundering and terrorist financing matters could result in more aggressive enforcement of these laws or the enactment of more
onerous regulation, which could have a material adverse impact on our business. In addition, abuse of our prepaid card programs for purposes
of money laundering or terrorist financing, notwithstanding our efforts to prevent such abuse through our regulatory compliance and risk
management programs, could cause reputational or other harm that would have a material adverse impact on our business.
In July 2011, the Financial Crimes Enforcement Network of the U.S. Department of the Treasury, or FinCEN, issued a final rule regarding
the applicability of the Bank Secrecy Act's anti-money laundering provisions to "prepaid access programs." This rulemaking clarifies the anti-
money laundering obligations for entities, such as us and our distributors, engaged in the provision and sale of prepaid access devices like
our GPR cards. We have registered with FinCEN as a "money services business" in our capacity as the manager of our prepaid programs. The
final rule also imposes certain anti-money laundering and record keeping requirements on persons who are considered "sellers" of prepaid
access. We believe we can configure our GPR programs so that the members of our load and reload networks will be eligible for an exemption
from this definition without materially altering our programs. The final rule requires, however, that persons who load and reload prepaid cards
(including closed-loop cards) must also implement policies and procedures reasonably adapted to prevent the sale of prepaid access to funds
that exceed $10,000 (the "Daily Limit") to any person during any given day in order to avoid being considered a "seller" of prepaid access.
Persons considered "sellers" of prepaid access are required to maintain an effective anti-money laundering program; report suspicious activity;
comply with certain recordkeeping requirements relating to customer identifying information and transaction data; and respond to law
enforcement requests. These requirements become effective in March 2012.
It is possible that retailers will determine that complying with the requirements applicable to "sellers" of prepaid access is unduly onerous.
As a result, these retailers will either seek to qualify for the exemption from this definition or cease distributing prepaid products. It is also
possible that some retailers will conclude that instituting the policies and procedures needed to provide reasonable assurance that their
aggregated prepaid sales to any person do not exceed the Daily Limit on any day is also unduly burdensome. Either of these conclusions could
cause a retailer to elect to cease distributing prepaid products after the final FinCEN rules become effective. Developments such as these could
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