Green Dot 2010 Annual Report Download - page 33

indemnify the banks that issue our cards for) fines, penalties and/or other assessments imposed by Visa or
MasterCard as a result of any data security breach. Further, a significant data security breach could lead to
additional regulation, which could impose new and costly compliance obligations. In addition, a data
security breach at one of the banks that issue our cards or at our retail distributors, network acceptance
members or third-party processors could result in significant reputational harm to us and cause the use
and acceptance of our cards to decline, either of which could have a significant adverse impact on our
operating revenues and future growth prospects.
Litigation or investigations could result in significant settlements, fines or penalties.
We have been the subject of general litigation and regulatory oversight in the past, and could be the
subject of litigation, including class actions, and regulatory or judicial proceedings or investigations in the
future. The outcome of litigation and regulatory or judicial proceedings or investigations is difficult to
predict. Plaintiffs or regulatory agencies in these matters may seek recovery of very large or indeterminate
amounts or seek to have aspects of our business suspended or modified. The monetary and other impact
of these actions may remain unknown for substantial periods of time. The cost to defend, settle or
otherwise resolve these matters may be significant.
If regulatory or judicial proceedings or investigations were to be initiated against us by private or
governmental entities, our business, results of operations and financial condition could be adversely
affected. Adverse publicity that may be associated with regulatory or judicial proceedings or investigations
could negatively impact our relationships with retail distributors, network acceptance members and card
processors and decrease acceptance and use of, and loyalty to, our products and related services.
We must adequately protect our brand and the intellectual property rights related to our
products and services and avoid infringing on the proprietary rights of others.
The Green Dot brand is important to our business, and we utilize trademark registrations and other
means to protect it. Our business would be harmed if we were unable to protect our brand against
infringement and its value was to decrease as a result.
We rely on a combination of trademark and copyright laws, trade secret protection and confidentiality
and license agreements to protect the intellectual property rights related to our products and services. We
may unknowingly violate the intellectual property or other proprietary rights of others and, thus, may be
subject to claims by third parties. If so, we may be required to devote significant time and resources to
defending against these claims or to protecting and enforcing our own rights. Some of our intellectual
property rights may not be protected by intellectual property laws, particularly in foreign jurisdictions. The
loss of our intellectual property or the inability to secure or enforce our intellectual property rights or to
defend successfully against an infringement action could harm our business, results of operations,
financial condition and prospects.
We are exposed to losses from cardholder account overdrafts.
Our cardholders can incur charges in excess of the funds available in their accounts, and we may
become liable for these overdrafts. While we decline authorization attempts for amounts that exceed the
available balance in a cardholder’s account, the application of card association rules, the timing of the
settlement of transactions and the assessment of the card’s monthly maintenance fee, among other
things, can result in overdrawn accounts.
Maintenance fee assessment overdrafts accounted for approximately 95% of aggregate overdrawn
account balances in the year ended December 31, 2010. Maintenance fee assessment overdrafts occur as
a result of our charging a cardholder, pursuant to the card’s terms and conditions, the monthly mainte-
nance fee at a time when he or she does not have sufficient funds in his or her account.
Our remaining overdraft exposure arises primarily from late-posting. A late-post occurs when a
merchant posts a transaction within a card association-permitted timeframe but subsequent to our release
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