"Regulation has been the elephant in the room as it relates to our company's story for the past few months," Streit said in the July 28, 2011, call to discuss the company's second quarter 2011 results. But, after reviewing the Durbin rule, Green Dot concluded it would be exempt from it.
"All Green Dot managed programs, including our Walmart MoneyCard program, will be exempt from interchange restrictions under the Durbin interchange amendment and, therefore, our programs will not be subject to lower interchange nor restricted interchange when the rules go into effect on Oct. 1," Streit said.
The Walmart MoneyCard is a reloadable prepaid card managed by Green Dot and offered at Wal-Mart Stores Inc. outlets. Green Dot offers a fee-free ATM network for MoneyCard customers. Free ATM services, as it turns out, makes the MoneyCard program compliant with the Durbin regulation's exemption requirement that fee-free ATM services be available for prepaid card users.
"We have had a free ATM network on our Green Dot-branded cards for some time now, so we can predict with experience and confidence that the financial impact of adding a similar free ATM network on the Wal-Mart program will have a revenue-neutral or slightly positive financial impact in 2012," Streit said, noting any new costs are offset by higher volume and retention.
Streit added there is no truth to the rumor Wal-Mart may force Green Dot to accept Durbin interchange caps.
Streit also said new anti-money laundering rules will not impact Green Dot's bottom line. In July 2011, the U.S. Department of the Treasury's Financial Crimes Enforcement Network (FinCEN) released new regulations amending the Bank Secrecy Act to increase regulation of the prepaid card industry. The Treasury Department is targeting the misuse of prepaid debit cards for money laundering, terrorist financing and other illegal transactions.
"Green Dot has always supported FinCEN on this issue and believes that new, tougher standards are important for the safety of our country and for the ongoing sustainability of the prepaid industry," Streit said.
After review of the new FinCEN rules, Green Dot concluded the new regulations would not harm Green Dot's business, Streit said.
Furthermore, Streit said Green Dot is cooperating with, and supportive of, the Florida Attorney General's investigation into the reloadable prepaid card industry. In May 2011, Florida Attorney General Pam Bondi announced her office is investigating the prepaid card industry for possible deceptive and unfair business practices surrounding fee schedules and disclosures. The AG issued subpoenas to five prepaid card companies, including Green Dot.
Streit indicated that the investigation is warranted and Green Dot welcomes the AG's probe. "We agree with Ms. Bondi that there are many prepaid card issuers and program managers who market cards in their state, but that not all of them have the consumers' interest at heart," he said.
Streit noted he and other Green Dot executives have met with members of Bondi's office and answered questions about Green Dot. Streit called the meeting "constructive and collaborative."
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