Green Dot 2012 Annual Report Download - page 27

17
State and federal legislators and regulatory authorities have become increasingly focused on the banking and
consumer financial services industries, and continue to propose and adopt new legislation that could result in significant
adverse changes in the regulatory landscape for financial institutions (including card issuing banks) and other financial
services companies (including us). For example, federal legislation, such as the bill proposed by Senator Menendez,
known as the Prepaid Card Consumer Protection Act of 2011, would limit the amount of fees, including monthly fees,
that we would be able to charge and would impose operational requirements, such as closing and refunding certain
dormant prepaid cards, which could decrease our operating revenues and increase our operating costs. Proposed
legislation in New Jersey and Illinois could, if passed, also limit the types and amounts of fees that we would be able
to charge, which could decrease our operating revenues. In addition, the Consumer Financial Protection Bureau, or
CFPB, issued an advance notice of proposed rulemaking in May 2012, requesting comment on topics including the
scope of regulation of prepaid cards, fees and disclosures applicable to prepaid cards, product features and other
information. If the CFPB's rulemaking results in changes in the way we or the banks that issue our cards are regulated,
these regulations could expose us and the banks that issue our cards to increased regulatory oversight, more
burdensome regulation of our business, and increased litigation risk, each of which could increase our costs and
decrease our operating revenues. Additionally, changes to the limitations placed on fees or the disclosures that must
be provided with respect to our products and services could increase our costs and decrease our operating revenues.
However, as the CFPB has not yet proposed any such rules, it is difficult to determine with any certainty what obligations
the final rules might impose or what impact they might have on our business.
We operate in a highly regulated environment, and failure by us, the banks that issue our cards or the
businesses that participate in our reload network to comply with applicable laws and regulations could have
an adverse effect on our business, financial position and results of operations.
We operate in a highly regulated environment, and failure by us, the banks that issue our cards or the businesses
that participate in our reload network to comply with the laws and regulations to which we are subject could negatively
impact our business. We are subject to state money transmission licensing requirements and a wide range of federal
and other state laws and regulations. In particular, our products and services are subject to an increasingly strict set
of legal and regulatory requirements intended to protect consumers and to help detect and prevent money laundering,
terrorist financing and other illicit activities.
Many of these laws and regulations are evolving, unclear and inconsistent across various jurisdictions, and ensuring
compliance with them is difficult and costly. For example, with increasing frequency, federal and state regulators are
holding businesses like ours to higher standards of training, monitoring and compliance, including monitoring for
possible violations of laws by the businesses that participate in our reload network. Failure by us or those businesses
to comply with the laws and regulations to which we are or may become subject could result in fines, penalties or
limitations on our ability to conduct our business, or federal or state actions, any of which could significantly harm our
reputation with consumers and other network participants, banks that issue our cards and regulators, and could
materially and adversely affect our business, operating results and financial condition.
Changes in rules or standards set by the payment networks, such as Visa and MasterCard, or changes in
debit network fees or products or interchange rates, could adversely affect our business, financial position
and results of operations.
We and the banks that issue our cards are subject to association rules that could subject us to a variety of fines
or penalties that may be levied by the card associations or networks for acts or omissions by us or businesses that
work with us, including card processors, such as Total System Services, Inc. The termination of the card association
registrations held by us or any of the banks that issue our cards or any changes in card association or other debit
network rules or standards, including interpretation and implementation of existing rules or standards, that increase
the cost of doing business or limit our ability to provide our products and services could have an adverse effect on our
business, operating results and financial condition. In addition, from time to time, card associations increase the
organization and/or processing fees that they charge, which could increase our operating expenses, reduce our profit
margin and adversely affect our business, operating results and financial condition.
Furthermore, a substantial portion of our operating revenues is derived from interchange fees. For the year ended
December 31, 2012, interchange revenues represented 30.2% of our total operating revenues, and we expect
interchange revenues to continue to represent a significant percentage of our total operating revenues in the near
term. The amount of interchange revenues that we earn is highly dependent on the interchange rates that the payment
networks set and adjust from time to time. The enactment of the Dodd-Frank Act required the Federal Reserve Board
to implement regulations that have substantially limited interchange fees for many issuers. While we believe the
interchange rates that may be earned by us and our subsidiary bank are exempt from such limitations, in light of this
legislation and recent attention generally on interchange rates in the United States, there can be no assurance that
the interpretation or enforcement of interchange legislation or regulation will not impact our interchange revenues