Green Dot's application to purchase Bonneville Bank should merit far more attention than might be fitting for an acquisition of this size ["Green Dot CEO: Wal-Mart Would Play No Role in Bank"]. Green Dot's products have a nationwide reach, and they serve the large and growing unbanked population. Wal-Mart's direct involvement in this deal, as a both a shareholder and as the largest business partner of Green Dot, makes it even more important.

Our comment on the application to the Federal Reserve emphasized the inequitable relationship between Wal-Mart and Green Dot. Wal-Mart business makes up 64 percent of Green Dot revenue. News that Wal-Mart was buying more than 2 million Green Dot shares only underscores the concern that Wal-Mart will exert undue influence on Green Dot Bank.

This application is an opportunity for regulators to apply consumer protection and credit cost standards to the prepaid market.

Regulation E protections, while observed by current Green Dot cards, still do not mandate full FDIC insurance protection for all general purpose reloadable debit card accounts.

It is also a chance to thwart a new form of payday lending. Some debit cards allow consumers to add a line of credit, provided that they establish direct deposit on the account. The cost of credit is very high. One issuer, MetaBank, charges $2.50 for each $20 loan increment with the expectation of repayment by a direct deposit in no more than 35 days. That is an annualized APR of at least 130 percent. There is no barrier to rolling over that loan the following month, either.

Wal-Mart MoneyCards offer a lower fee structure than Green Dot's cards issued by Columbus Bank & Trust. Surely, Green Dot wants to enhance its EPS from this transaction. While there might be savings to be had by eliminating CB&T, Green Dot has to overcome the dilution of its shares that were predicated by the Bonneville acquisition. Those challenges will pressure Green Dot to add to their fee structure. It begs the question, why can't the range of prepaid cards include a no frills low fee product, just like the free checking products offered at retail banks?

Prepaid cards are emerging as the new model that low-income consumers use to access the payments system. This deal narrows the gap between the nation's largest retailer and those consumers. It remains undetermined what basket of deposit and credit services will make up the new cards from Green Dot Bank. As advocates for those consumers, we are asking for some assurances to those concerns: no credit products on Green Dot cards, full FDIC protection, and the availability of low-cost access to the payments system.

Adam Rust
Community Reinvestment Association of North Carolina

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