The Federal Reserve has imposed a $44 million fine on Green Dot for engaging in “numerous” unfair and deceptive practices related to the marketing, selling, and servicing of its prepaid cards and tax return preparation payment services.
According to the Fed, Green Dot violated consumer law and also maintained a deficient consumer compliance risk management program. For instance, the company did not properly disclose the tax refund processing fee associated with tax preparation services provided on a third-party website. Additionally, Green Dot blocked access to accounts of legitimate customers receiving unemployment benefits and failed to implement reasonable policies and procedures to assist these customers in resolving the account access issues.
Alongside the financial penalty, Green Dot is required to hire an independent third-party firm to enhance its consumer compliance risk management program, establish an effective anti-money laundering (AML) program, and conduct a review of specific transaction activities.
Following the announcement, Green Dot’s shares fell by over five percent in afternoon trading on Friday.
The company collaborates with prominent brands, including Apple and Walmart, to provide debit card services and launched its own mobile banking platform in 2021. However, it faced challenges in 2022, including the dismissal of CEO Dan Henry after three partners indicated they would not renew contracts and a dispute with Uber.