Green Dot 2015 Annual Report Download - page 23

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laws could expire or be amended, any of which could have a material adverse effect on our business, prospects, results
of operations, and financial condition. State regulators have broad discretionary power and may impose new
requirements, interpret or enforce existing regulatory requirements in different ways or issue new administrative rules,
even if not contained in state statutes, and state attorneys general could take actions, that affect the way we offer our
tax refund-related services and may force us to terminate, modify, or cease our operations in particular states. State
or Federal regulators could also impose rules that are generally adverse to our tax refund-related services. Any new
requirements or rules, or new interpretations of existing requirements or rules, or failure to follow requirements or rules,
or future lawsuits or rulings, could have a material adverse effect on our business, prospects, results of operations,
and financial condition.
We operate in a highly regulated environment, and failure by us, the banks that issue our cards, the
businesses that participate in our reload network, the banks that assist with our tax refund processing services,
and our tax preparation partners 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 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 and MasterCard PTS. The termination of the card association registrations held
by us 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, 2015, interchange revenues represented 28.3% of our total operating revenues, and we expect
interchange revenues to continue to represent a significant percentage of our total operating revenues. 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 the interchange rates that may be earned by us and our
subsidiary bank are exempt from the limitations imposed by the Dodd-Frank Act, there can be no assurance that future
regulation or changes by the payment networks will not impact our interchange revenues substantially. If interchange
rates decline, whether due to actions by the payment networks or future regulation, we would likely need to change
our fee structure to offset the loss of interchange revenues. However, our ability to make these changes is limited by
the terms of our contracts and other commercial factors, such as price competition. To the extent we increase the
pricing of our products and services, we might find it more difficult to acquire consumers and to maintain or grow card
usage and customer retention, and we could suffer reputational damage and become subject to greater regulatory
scrutiny. We also might have to discontinue certain products or services. As a result, our total operating revenues,
operating results, prospects for future growth and overall business could be materially and adversely affected.