Green Dot 2011 Annual Report Download - page 22

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acquisition transaction. The federal banking agencies are required to rate each insured institution’s performance under
the CRA and to make that information publicly available. Our subsidiary bank currently complies with the CRA through
investments and other activities that are designed to benefit the needs of low and moderate income communities. Our
subsidiary bank is currently preparing to submit its CRA Strategic Plan. If the banking regulatory authorities do not
approve our bank's strategic plan, our bank could be required to engage in lending and other community outreach
activities in the community in which it is located.
Restrictions on Transactions with Affiliates and Insiders. Transactions between a bank and its nonbanking affiliates
are regulated by the Federal Reserve Board. These regulations limit the types and amount of these transactions,
require certain levels of collateral for loans to affiliated parties and generally require those transactions to be on an
arm’s-length basis. As a bank holding company, our transactions with our subsidiary bank are limited by these
regulations, although we do not anticipate that these restrictions will adversely affect our ability to conduct our current
operations or materially prohibit us from engaging in activities that are currently contemplated by our business strategies.
Issuing Banks. All of the GPR cards that we provide and the Walmart gift cards we service are issued by either a
federally- or state-chartered bank. Thus, we are subject to the oversight of the regulators for, and certain laws applicable
to, these card issuing banks. These banking laws require us, as a servicer to the banks that issue our cards, among
other things, to undertake compliance actions similar to those described under “Anti-Money Laundering Laws” above
and to comply with the privacy regulations promulgated under the GLB Act as discussed under “Privacy and Information
Safeguard Laws” above. Our subsidiary bank will become subject to the additional regulatory oversight and legal
obligations described above, in its capacity as issuing bank, when it becomes an issuer of our GPR cards, which is
expected to occur in the second quarter of 2012.
Other. The policies of regulatory authorities, including the monetary policy of the Federal Reserve Board, have a
significant effect on the operating results of bank holding companies and their subsidiaries. Moreover, additional
changes to banking laws and regulations are possible in the near future. The Dodd-Frank Act made numerous changes
to the regulatory framework governing banking organizations, and many of these changes require rulemakings by
regulators, only a small portion of which have been completed. These regulations could likewise substantially affect
our business and operations. In addition, the U.S. Congress is considering various proposals relating to the activities
and supervision of banks and bank holding companies, some of which could materially affect our operations and those
of our subsidiary bank. Although there can be no assurance regarding the ultimate impact that adoption of these
proposals will have on us, if the proposals are enacted, we expect that the benefits we seek to realize from our recent
bank acquisition will be reduced.
Consumer Protection Laws
We are subject to state and federal consumer protection laws, including laws prohibiting unfair and deceptive
practices, regulating electronic fund transfers and protecting consumer nonpublic information. We believe that we have
appropriate procedures in place for compliance with these consumer protection laws, but many issues regarding our
service have not yet been addressed by the federal and state agencies charged with interpreting the applicable laws.
Although not expressly required to do so under the Electronic Fund Transfer Act and Regulation E of the Federal
Reserve Board, we disclose, consistent with banking industry practice, the terms of our electronic fund transfer services
to consumers prior to their use of the service, provide 21 days’ advance notice of material changes, establish specific
error resolution procedures and timetables, and limit customer liability for transactions that are not authorized by the
consumer.
In June 2011, the Consumer Financial Protection Bureau, or CFPB, issued a notice and request for comment on
defining what kinds of companies should be included as “larger participants” for its nonbank supervision program. The
CFPB subsequently published its first "larger participant" proposed rule, in February 2012, defining nonbank “larger
participants” as entities engaged in consumer debt collection and consumer reporting. Although the CFPB did not
include prepaid card issuers in this proposed rule, the CFPB may take actions in the future, including other rulemakings,
that subject us or our products and services to its oversight and regulation.
Payment Networks
In order to provide our products and services, we, as well as the banks that issue our cards, must register with
Visa and MasterCard and, as a result, are subject to payment network rules that could subject us to a variety of fines
or penalties that may be levied by the payment networks for certain acts or omissions. The banks that issue our cards
are specifically registered as “members” of the Visa and/or MasterCard payment networks. Visa and MasterCard set
the standards with which we and the card issuing banks must comply.