Billion-Dollar Bank Paying $44,000,000 Fine for Allegedly Freezing Customers’ Accounts, Charging Hidden Fees, Deceiving Customers

A Texas-based bank holding company is agreeing to pay a $44 million fine to the Federal Reserve for a long list of alleged consumer protection violations.

The Federal Reserve Board of Governors says it has taken enforcement action against Green Dot for engaging in numerous unfair and deceptive practices and running a non-compliant consumer risk management program.

Between May 2020 and June 2020, the Fed says the bank engaged in unfair acts or practices when it froze access to prepaid accounts collecting Washington state unemployment insurance benefits without reasonable policies and procedures.

From August 2020 to September 2020, the regulator says Green Dot engaged in an unfair act or practice when it froze customers’ access to their funds by extending authorization holds on general purpose reloadable (GPR) transactions for days.

Between January 2017 and December 2022, the regulator says Green Dot subsidiary Santa Barbara Tax Products Group (TPG) engaged in a deceptive act or practice when it offered a “pay nothing out of pocket” option to customers looking to prepare their taxes.

From November 2017 to January 2021, the regulator says Green Dot misrepresented claims that its GPR prepaid debit card accounts would be shuttered once a customer’s balance hits zero. Green Dot ended up charging many customers monthly recurring fees after the bank failed to close their accounts even after hitting the zero-balance threshold.

The Fed also says Green Dot also engaged in a deceptive act or practice between June 2019 and December 2020 when it advertised that customers could open GPR accounts online or via a telephone. In reality, customers could only open GPR accounts online.

The Fed is requiring Green Dot to remedy its deficiencies, including hiring a third-party consultant to improve its consumer compliance risk management program and ensure its services comply with consumer protection laws.

Green Dot has agreed to the Fed’s terms without admitting or denying the regulator’s findings.

Green Dot is a US fintech firm with over $4.817 billion in assets as of December 31st, 2023.

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