Green Dot 2015 Annual Report Download - page 25

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A data security breach could expose us to liability and protracted and costly litigation, and could adversely
affect our reputation and operating revenues.
We and our retail distributors, tax preparation partners, network acceptance members, third-party processors and
the merchants that accept our cards receive, transmit and store confidential customer and other information in
connection with the sale and use of our products and services. Our encryption software and the other technologies
we use to provide security for storage, processing and transmission of confidential customer and other information
may not be effective to protect against data security breaches by third parties. The risk of unauthorized circumvention
of our security measures has been heightened by advances in computer capabilities and the increasing sophistication
of hackers. Our retail distributors, tax preparation partners, network acceptance members, third-party processors and
the merchants that accept our cards also may experience similar security breaches involving the receipt, transmission
and storage of our confidential customer and other information. Improper access to our or these third parties’ systems
or databases could result in the theft, publication, deletion or modification of confidential customer and other information.
A data security breach of the systems on which sensitive cardholder or other customer or end-customer data and
account information are stored could lead to fraudulent activity involving our products and services, reputational damage
and claims or regulatory actions against us. If we are sued in connection with any data security breach, we could be
involved in protracted and costly litigation. If unsuccessful in defending that litigation, we might be forced to pay damages
and/or change our business practices or pricing structure, any of which could have a material adverse effect on our
operating revenues and profitability. We would also likely have to pay (or 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 third-party banks that issue our cards or at
our retail distributors, tax preparation partners, network acceptance members, third-party processors or the merchants
that accept our cards could result in significant reputational harm to us and cause the use and acceptance of our cards
or other products and services to decline, either of which could have a significant adverse impact on our operating
revenues and future growth prospects. Moreover, it may require substantial financial resources to address and
remediate any such breach, including additional costs for replacement cards, manufacturing, distribution, re-stocking
fees, fraud monitoring and other added security measures, amongst others, which could have a significant adverse
impact on our operating results.
Litigation or investigations could result in significant settlements, fines or penalties.
We are subject to regulatory oversight in the normal course of our business, and have been and from time to time
may be subject to regulatory or judicial proceedings or investigations. The outcome of securities class actions and
other litigation and regulatory or judicial proceedings or investigations is difficult to predict. Plaintiffs or regulatory
agencies or authorities in these matters may seek recovery of very large or indeterminate amounts, seek to have
aspects of our business suspended or modified or seek to impose sanctions, including significant monetary fines. The
monetary and other impact of these actions, litigations, proceedings or investigations may remain unknown for
substantial periods of time. The cost to defend, settle or otherwise resolve these matters may be significant. Further,
an unfavorable resolution of litigation, proceedings or investigations against us could have a material adverse effect
on our business, operating results, or financial condition. In this regard, such costs could make it more difficult to
maintain the capital, leverage and other financial commitments at levels we have agreed to with the Federal Reserve
Board and the Utah Department of Financial Institutions. If regulatory or judicial proceedings or investigations were
to be initiated against us by private or governmental entities, adverse publicity that may be associated with these
proceedings or investigations could negatively impact our relationships with retail distributors, tax preparation partners,
network acceptance members and card processors and decrease acceptance and use of, and loyalty to, our products
and related services, and could impact the price of our Class A common stock. In addition, such proceedings or
investigations could increase the risk that we will be involved in litigation. The outcome of any such litigation is difficult
to predict and the cost to defend, settle or otherwise resolve these matters may be significant. For the foregoing reasons,
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 or our stock price could decline.
We must adequately protect our brand and our intellectual property rights related to our products and
services and avoid infringing on the proprietary rights of others.
The Green Dot, GoBank and TPG brands are important to our business, and we utilize trademark registrations
and other means to protect them. 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 patent, 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 currently have