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On March 2, 2022, Green Dot Bank, a banking division of fintech firm Green Dot Corp that provides savings accounts and prepaid debit cards largely through deals with retailers such as Walmart, received a proposed order from the U.S. Federal Reserve’s Board of Governors. This enforcement action is related to allegations that the Bank engaged in deceptive and abusive acts or practices in violation of the U.S. Consumer Financial Protection Act.
The proposed order revolves around Green Dot’s “overdraft” product, which allows customers to overdraw their accounts up to a certain amount without incurring any fee. The Federal Reserve alleges that Green Dot represented to consumers that they could avoid overdraft fees by loading money onto their accounts before the end of the day.
However, Green Dot allegedly blocked consumers from loading funds onto their accounts between 10 p.m ET and 1 a.m ET. As a result, consumers who attempted to load money during this period could potentially incur overdraft fees despite Green Dot’s representations to the contrary.
The Federal Reserve has proposed that Green Dot compensate consumers who incurred such overdraft charges and change the procedures related to this service. Green Dot, on the other hand, has disputed the Fed’s claims and is currently considering its options.
If finalized, the proposed enforcement action would require Green Dot to pay restitution or provide other relief to consumers affected by these practices. It would also place restrictions on the bank’s future conduct and charge civil money penalties.
As of now, Green Dot said it is fully cooperating with the Federal Reserve but has not made a definitive decision about accepting or contesting the proposed order.
