September 12, 2008
Judith Rinearson, Esq.
1290 Avenue of the Americas
New York, NY 10104-3300
Re: CB&T MoneyPak Card
Dear Ms. Rinearson:
I am writing in response to your licensing inquiry in connection with Columbus Bank & Trust Company's ("CB&T") issuance of MoneyPak Cards sold in New York State. In particular, this letter addresses whether Green Dot, Total Systems Services Inc. ("TSYS") and various retail establishments located in the State ("Retailers") require money transmission licenses under the New York Banking Law in connection with the issuance of the MoneyPak Cards by CB&T, an FDIC insured Georgia chartered state bank. Specifically, the Retailers are limited to those that CB&T has appointed or will appoint as its agent, in writing, for the purpose of selling Money Pak Cards. Therefore, this inquiry response does not address the other retailers described in your letter of July 9, 2008 as "Remaining Locations" with respect to the sale of MoneyPak Cards. The licensing inquiry for the "Remaining Locations" will be addressed under separate cover.
By way of background, as you are aware, on March 16, 2007, the State of New York Banking Department ("Banking Department") issued an opinion letter in which it was explained that Green Dot, TSYS and the Retailers did not require money transmission licenses under Article 13-B of New York's Banking Law in connection with the issuance of stored value cards by CB&T ("Prepaid Cards"). The Prepaid Cards discussed in the opinion are branded with VISA or MasterCard logos and are useable to make purchases wherever such branded cards are accepted and/or to obtain cash at ATMs. After the initial load on the Prepaid Cards they can be reloaded as well. CB&T, as the card issuer, has made itself fully liable to every cardholder for the purchased stored value card/reloads, the transactions conducted with such cards and for the balances on them. CB&T appointed Green Dot as its agent for the authorized services that Green Dot performs with respect to the Prepaid Cards. Likewise, CB&T appointed TSYS as its agent with respect to the movement of funds received for the purchase/reload of the Prepaid Cards among various CB&T accounts. In addition, CB&T appointed the Retailers as its agents for the limited purpose of selling the Prepaid Cards and delivering to CB&T any funds received for the purchase/reload of such cards. It was concluded that neither Green Dot, TSYS, nor the Retailers required a money transmission license as contemplated under Article 13-B of the New York Banking Law in light of CB&T's agency relationships with them in connection with their roles and responsibilities regarding the Prepaid Cards.
With respect to the MoneyPak Card licensing inquiry, in correspondence and in telephone conversations and meetings, it has been explained that CB&T is also the issuer of the MoneyPak Card that is branded with Green Dot's name and logo. A MoneyPak Card is a temporary place for a customer to hold a specific amount of funds for purposes of making a transfer of such funds onto a Prepaid Card, another prepaid card issued by a Partner Bank1 or to pay bills with participating billers and other contracted payees. The MoneyPak Card can be loaded once in an amount up to $1100.
Green Dot assists CB&T with the distribution of MoneyPak Cards through the Retailers who are not affiliated with CB&T or Green Dot, and with the management of the MoneyPak Card program. Green Dot provides certain processing services for the MoneyPak Card program such as maintaining the customer call center through which customers can indicate who the recipient of the funds will be, determining if prepaid cards are eligible for reloading, verifying the propriety of bill payment transactions, and communicating with CB&T and Partner Banks regarding the funds to be transferred for MoneyPak Card transactions. CB&T retains full control of, and oversight for, the MoneyPak Card program.
TSYS, a subsidiary of Synovus Financial Corp., the parent of CB&T, acts as a card processor and accounting and settlement agent regarding MoneyPak Card transfers of funds onto a Prepaid Card. TSYS obtains and maintains information on such MoneyPak Card transfers, and as the accounting and settlement agent for that purpose, uses the information to determine the total dollar amount required to be placed in the CB&T Operating, Funding and Settlement Accounts as such MoneyPak transactions occur.
Purchasing a MoneyPak Card
Customers purchase MoneyPak Cards from the Retailers and load them, typically by using cash or by making a payment by check. Debit and credit cards can also be used to load MoneyPak Cards. The Retailers accept the funds, provide the customers with receipts indicating the date, the dollar amount to be loaded onto the MoneyPak Card, and a special passcode for its use. As is more fully explained below, the funds received by the Retailers are then forwarded to CB&T.
Using the MoneyPak Card to Transfer Funds onto Partner Bank Stored Value Cards
Once a MoneyPak Card is purchased, the customer must contact the Green Dot interactive phone system or visit the Green Dot website to indicate who the recipient of the funds will be. Customers seeking to load funds from a MoneyPak Card onto a stored value card issued by a Partner Bank must provide the relevant card or account number. Green Dot then sends a message to such bank requesting verification that the card number is eligible for reloading. If the card is eligible for reloading and the amount the customer seeks to transfer to it does not exceed the card maximum cap, Green Dot sends an electronic message to the Partner Bank to load the specified dollar amount onto the customer's prepaid card. If the card is ineligible for reloading, the transaction is not processed and the customer is advised to contact the Partner Bank.
Using the MoneyPak Card to Transfer Funds onto a Prepaid Card (CB&T-Green Dot Stored Value Card)
If the stored value card to be loaded is a Prepaid Card, Green Dot verifies the eligibility of the card for reload purposes through the CB&T prepaid card database, including the amount permitted to be reloaded. If the card is eligible for reloading and the amount the customer seeks transfer to it from the MoneyPak Card does not exceed the card maximum cap, Green Dot notifies CB&T to allocate the funds to the designated Prepaid Card. If the card is ineligible for reloading the transaction is not processed and the customer is advised to contact Green Dot customer service.
Using the MoneyPak Card for Bill Payment
Billers enter into contracts with Green Dot to allow customer payments to be made using the MoneyPak Card. Currently, bill payments made with MoneyPak funds represent about 1% of all MoneyPak transactions. Billers provide their customers with instructions on how to pay their bills. Typically, a customer must either call the biller's interactive phone system or visit the biller's website in order to supply the relevant account and MoneyPak Card information used to process the payment transaction. Once this information is received, the biller sends an electronic message to Green Dot to verify the validity of the customer's MoneyPak Card information and to confirm the amount the customer requested to be paid. If the MoneyPak Card is not valid, or there are not enough funds available to pay the bill as requested, the transaction is not processed and the customer is instructed to contact the biller. If the MoneyPak Card is valid and the funds are sufficient to pay the bill, Green Dot notifies the biller and the biller approves the payment transaction. The customer's account is then credited by the biller. At that point, Green Dot sends a message to CB&T with information about the bill payment transaction and the amount of the funds to be forwarded to the biller.
The Flow of Funds
Customer funds received by a Retailer for purchases of MoneyPak Cards are placed in the Retailer's bank account. The Retailer then sends the funds to CB&T's Retailer Reserve Account held at CB&T, by CB&T, as Trustee and Fiduciary for Green Dot cardholders. Each night, CB&T's processing system automatically transfers all of the funds in the Retailer Reserve Account to the CB&T Operating Account held at CB&T. Funds in the Operating Account, except for those representing customer fees, are held by CB&T, as Trustee and Fiduciary for Green Dot cardholders. The funds are held in this account until the MoneyPak Cards are activated.
MoneyPak Cards Activated for Transfer to a Prepaid Card (CB&TGreen Dot Stored Value Card)
If a MoneyPak Card is activated for a transfer to a Prepaid Card, the funds to be transferred are sent from the CB&T Operating Account to the CB&T Funding Account held at CB&T, by CB&T, as Trustee and Fiduciary for Green Dot cardholders. Once the Prepaid Card is then used, Funds held in the Funding Account are 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. 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. When MoneyPak funds are transferred onto a Prepaid Card, TSYS, as CB&T's accounting and settlement agent, conducts all of the transfers from the Operating Account, to the Funding Account and to the Settlement Account.
MoneyPak Cards Activated for Transfer to Partner Bank Issued Stored Value Card
When a MoneyPak Card is activated for a transfer of money onto a Partner Bank issued stored value card, the funds are sent by wire transfer from the CB&T Operating Account to an account designated by the Partner Bank for funds to be received from CB&T with respect to such MoneyPak transactions. Once funds have been delivered to the account designated by the Partner Bank, the obligation to the customer rests with the Partner Bank and is governed by the cardholder agreement between it and the customer. CB&T handles settlement for these types of transactions and thus, it makes all the transfers from the Operating Account to the appropriate Partner Bank accounts.
MoneyPak Cards Activated to Pay Bills
If a MoneyPak Card is activated to transfer money to pay a bill, the funds are transferred by wire from the CB&T Operating Account to an account designated by the biller to receive such payments from CB&T with respect to such MoneyPak transactions. Once funds have been delivered to the biller account, the obligation to the customer rests with the biller and is governed by the agreement between the biller and the customer. CB&T handles settlement for these transactions and accordingly, makes all the transfers from the Operating Account to the appropriate biller accounts.
Liability for Funds
As was represented to the Banking Department, CB&T is fully liable to every cardholder for purchased MoneyPak Cards, and the transactions conducted therewith. Therefore, if funds are not remitted for any reason from a Retailer to CB&T relating to a MoneyPak Card purchase, 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.
With respect to the services that Green Dot provides for the MoneyPak Cards, CB&T has appointed Green Dot as its agent. Likewise, CB&T has appointed TSYS as its agent with respect to the services that TSYS provides for the MoneyPak Cards.
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 MoneyPak Cards. In addition, it has been explained to the Banking Department that CB&T has had Retailers in New York State sign a New York Sales Limited Agency Agreement ("Agency Agreement") in the form presented to the Banking Department. The Agency Agreement, among other things, provides that CB&T will appoint the Retailers located in New York State as CB&T's sales agents for the purpose of selling the MoneyPak Cards and delivering to CB&T any fees and payments paid by the purchasers of such Cards. The Agency Agreement further provides that the Retailers acknowledge that CB&T is the issuer of the MoneyPak Card and also responsible for all of the amounts collected by the Retailers from consumers who purchase such cards.
The Banking Department has reviewed and considered the information discussed above regarding the MoneyPak Card program, including that with respect to the operation of the program, and the roles and responsibilities of CB&T, Green Dot, TSYS and the Retailers regarding the same. Based on its review, the Banking Department is of the opinion that neither Green Dot, TSYS, nor the Retailers located in New York State require a money transmission license as contemplated under Article 13-B of the New York Banking Law in order to conduct the activity attributed to each as described above, since they operate as agents of CB&T in doing so.
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
cc: John ReVeal, Esq.
Counsel to CB&T
Deputy Superintendent Regina Stone
Ms. Joy B. Wells
Synovus Innovative Solutions
John C. Ricci, Esq.
General Counsel, Green Dot
Christine Lockwood, Esq.
Assistant Counsel, Green Dot
Mr. Stephen S. Pleger
Georgia Department of Banking and Finance
Ms. Rebecca A. Berryman
Senior Capital Markets and Securities Specialist
Federal Deposit Insurance Corporation
_____________________1 The Partner Banks have each entered into an agreement with Green Dot whereby Green Dot's computer and communications systems are utilized in order to permit the cardholders of the Partner Banks to load value onto their prepaid stored value cards issued by the Partner Banks.