Bank Freedom, a marketer of prepaid debit cards, has signed a new issuer that eventually will replace its existing issuer MetaBank.
MetaBank notified the Newport Beach, Calif, company, a subsidiary of Prepaid Card Holdings Inc., last week that it would not be renewing its existing contract after it expires in November, Bruce Berman, Bank Freedom's chief executive, said Monday.
The notification came after Bank Freedom told MetaBank, a unit of Meta Financial Group Inc. of Storm Lake, Iowa, that it planned to add a new bank issuer. Bank Freedom's decision stemmed from MetaBank's troubles with its regulator and a desire to cut costs, Berman said. In October, the Office of Thrift Supervision forced MetaBank to shut down a loan program for what the regulator called unfair or deceptive practices. MetaBank also can't extensively change business arrangements or enter deals without prior OTS approval.
A MetaBank spokeswoman said the decision not to renew Bank Freedom's contract was an "ordinary course of business decision." Bank Freedom has a contract with a new issuer, which Berman would not identify. He said he expects the partner to begin issuing cards in May or June.