March 16, 2007
Re: Application for Money Transmitter License submitted by Green Dot Corporation (formerly, Next Estate Communications, Inc.)
I am writing in response to the licensing issues that have been raised in connection with Green Dot Corporation's ("Green Dot") application to be licensed as a money transmitter in New York State. In particular, this letter addresses only whether Green Dot, various retail establishments, and Total Systems Services, Inc. ("TSYS") require money transmission licenses under the New York Banking Law in connection with prepaid cards issued by Columbus Bank and Trust Company ("CB&T"), an FDIC insured Georgia chartered state bank. CB&T's parent, Synovus Financial Corp., is a multibank holding company. Therefore, as discussed, this response does not address or give an opinion on licensing requirements for any of the aforementioned parties regarding the Moneypak reload products or the bill payment service lines of business. Those business lines and any licensing issues connected thereto will be addressed under separate cover.
In connection with Green Dot's application for a money transmitter license, correspondence provided to the State of New York Banking Department ("Banking Department") explains CB&T is the issuer of prepaid cards ("Card" or "Cards") branded with Visa or MasterCard logos that are useable to make purchases wherever such branded Cards are accepted and/or to obtain cash at ATMs ("Card Program"). Green Dot assists CB&T with the distribution of the Cards through various retailers not affiliated with CB&T or Green Dot ("Retailer" or "Retailers") and with the management of the Card Program. Green Dot provides certain processing services for the Card Program, such as maintaining the customer call center ("Call Center") through which customers activate new Cards and reloads to the Cards, and responds to customer inquiries and complaints. CB&T retains full control of and oversight for the Card Program.
In accordance with the Stored Value Card Processing Agreement between Green Dot and TSYS, a subsidiary of Synovus Financial Corp., the parent of CB&T, TSYS acts as a card processor and the accounting and settlement agent regarding the Card Program. As the card processor for the Card Program, TSYS obtains and maintains information on Card transactions, as well as information on card purchases and reloads. As the accounting and settlement agent for the Card Program, TSYS uses information that it obtains on Cards and Card transactions to determine the total dollar amount that needs to be in the CB&T Funding and Settlement Accounts.
As was more fully set forth in the correspondence submitted to the Banking Department, and as was discussed most recently at a meeting with Banking Department representatives, customers purchase the Cards at the Retailers and load them, typically by cash or check payments. Debit and credit cards can also be used to load and reload the Cards. Once customers purchase a Card or Card reload, they must contact the Green Dot Customer Center and provide the appropriate identifying information in order to activate the Card and reload. A Card is then sent to the customer. If requested, Green Dot will provide the customer with his/her Card number over the phone so that the customer can begin to make internet or telephone purchases prior to receiving their Card.
The funds received by a Retailer for customer Card purchases and reloads are placed in the Retailer's bank account. The Retailer then sends the funds to CB&T's Retailer Account held at CB&T, by CB&T, as Trustee and Fiduciary for Green Dot cardholders incoming retailer funds. Each night, all of the funds in the Retailer Account are transferred to the appropriate VISA or Master Card CB&T Operating Account held at CB&T. All of the funds in the Operating Account, except for the customer fees, are held by CB&T, as Trustee and Fiduciary for Green Dot cardholders operating account. Funds are held in this account for Cards and Card reloads until the Cards are activated. Once activated, funds related to the activated Cards and reloads are transferred to the CB&T Funding Account held at CB&T, by CB&T, as Trustee and Fiduciary for Green Dot cardholders funding. Funds held in the Funding Account are then transferred to the appropriate CB&T VISA or Master Card Settlement Account held at CB&T, by CB&T, as Trustee and Fiduciary for the Green Dot cardholders settlement. The funds are held in the settlement accounts for merchant transactions posted each day, and are debited by VISA and Master Card for their respective transactions.
As was represented to the Banking Department, CB&T is fully liable to every cardholder for purchased Cards/re-loads, and transactions conducted with Cards, and the Card balances. Therefore, if funds are not remitted for any reason from a Retailer to CB&T relating to a Card purchase/re-load, any dispute or resolution regarding the failure to remit the funds would only be between CB&T and the Retailer. Moreover, the failure of the Retailer to remit the funds to CB&T would never be the basis for withholding cardholder funds.
In connection with the aforementioned Card Program, various documents, including agreements between certain of the parties have been provided to the Banking Department for review. In particular, with respect to Green Dot's authorized services for the Card Program, an addendum to the Stored Value Card Agreement between Green Dot (formerly Next Estate Communications, Inc.) and CB&T, indicates that Green Dot was appointed as agent for CB&T. We understand from discussions had at our meeting that this Stored Value Card Agreement is presently being updated, and in doing so, it is CB&T's intention to continue to appoint Green Dot as agent for the authorized services that Green Dot performs for the Card Program.
Documentation provided to the Banking Department regarding TSYS and CB&T, indicates that TSYS is an agent of CB&T with respect to conducting the movement of Card Program funds among the various CB&T accounts as described above.
As for the Retailers, documentation reviewed by the Banking Department reflects that each Retailer, including those located in New York State, is required to enter into a Sales and Distribution Agreement with Green Dot with respect to marketing, promoting, stocking, and selling the Cards. While the current Sales and Distribution Agreement that we were given states that the Retailers are deemed agents of Green Dot with the authority to sell payment instruments and engage in money transmission on Green Dot's behalf, it has been explained to the Banking Department that CB&T plans to have all of its Retailers in New York State sign a New York Sales Limited Agency Agreement ("Agency Agreement") in the form presented to the Banking Department. The proposed Agency Agreement, among other things, provides that CB&T will appoint the Retailers located in New York State as CB&T's sales agents solely for the limited purpose of selling the prepaid Cards and delivering to CB&T any fees and payments paid by the purchasers of the Cards under the Card Program. Furthermore, the proposed Agency Agreement states that the Retailers will acknowledge that CB&T is the issuer of the Cards and is also responsible for all of the amounts collected by the Retailers from consumers who purchase the Cards.
Based upon a review of the information received and discussed regarding the Card Program noted above, including that with respect to the operation of the Card Program, the roles and responsibilities of CB&T, Green Dot, TSYS and the Retailers regarding the Card Program, the agency relationships that CB&T has with Green Dot and TSYS, and that which it proposes to have with the Retailers located in New York State, the Banking Department is of the opinion that Green Dot, TSYS, and the Retailers located in New York State would not require a money transmission license as contemplated under Article 13-B of the New York Banking Law. However, this licensing opinion regarding Green Dot is conditioned on CB&T and Green Dot executing the new Stored Value Card Agreement in which CB&T continues to appoint Green Dot as agent for the authorized services that it performs for the Card Program. Likewise, the licensing opinion for the Retailers is conditioned on CB&T and each of the Retailers located in New York State executing the proposed Agency Agreement. To that end, the Banking Department must be provided with a copy of the newly executed Stored Value Card Agreement between CB&T and Green Dot once it is available. Further, CB&T must give the Banking Department a current listing of all of its Retailers located in New York State. This listing of Retailers should be accompanied by a notarized statement from an authorized representative of CB&T attesting to the fact that CB&T has obtained a fully executed Agency Agreement from all of the listed Retailers and that CB&T shall obtain executed Agency Agreements from all future Card Program Retailers located in New York State.
Thank you for all of your efforts in this matter and if you have any questions I can be reached at (212) 709-1650.
Christine R. Cardi
John ReVeal, Esq.
Deputy Superintendent Regina Stone
Ms. Joy B. Wells
John C. Ricci, Esq.
Mr. Stephen S. Pleger
Ms. Rebecca A. Berryman