Andreassen, Kristine. September 24, OCC Reins in Urban Trust over CheckSmart Partnership

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1 Page 1 of 6 Andreassen, Kristine From: Paybefore [reply@paybefore.com] Sent: Monday, September 24, :45 PM To: Andreassen, Kristine Subject: - OCC Reins in Urban Trust over CheckSmart Partnership Having trouble viewing this ? Click here Lead Sponsor: September 24, 2012 OCC Reins in Urban Trust over CheckSmart Partnership Payza s Bangladesh Remittance Service Booming Amex Aims to Be First Bankcard in Apple Passbook Western Union Products Rolling out to Always Money Locations Facebook Extends Mobile Payments to Three Continents via Bango Discover Bank Settlement with FDIC, CFPB Serves as Warning to Prepaid The Buzz OCC Reins in Urban Trust over CheckSmart Partnership The Office of the Comptroller of the Currency has issued an enforcement action against Florida-based Urban Trust Bank over what the OCC describes as violations of law and regulations and unsafe and unsound banking practices relating to vendor management practices and failure to implement an approved business plan, specifically concerning existing and new products and services. In a formal agreement made public last week, the OCC said the bank s board must, among other things, prepare a written analysis of its prepaid debit card program, which more fully assesses the risks and benefits of this line of business, within 60 days. While the agreement doesn t mention a third party by name, Urban Trust Bank and

2 Page 2 of 6 partner CheckSmart, a check casher and payday lender, drew fire earlier this year from critics who claimed their Insight prepaid cards enabled cardholders to take out what were essentially illegal payday loans in Arizona, Ohio and other states where CheckSmart could not make payday loans directly. The Insight program charged an overdraft fee of $15 per $100 negative balance. In a letter sent to the OCC on May 3, a coalition of consumer advocacy groups urged the agency to crack down on the program, which the letter claimed could cost cardholders as much as 401 percent interest for a 14-day loan higher than the interest rate limit in Arizona (36 percent) and Ohio (28 percent). Following the letter, CheckSmart parent company Community Choice Financial Inc. scrapped its planned IPO. And in August, Comptroller of the Currency Thomas J. Curry sent a letter to the consumer groups saying the agency had entered the formal agreement with Urban Trust to address deficiencies in its [the bank s] oversight of third party relationships with vendors, which includes CheckSmart... The OCC did not order Urban Trust to dissolve its connection with CheckSmart, but its action suggests that regulators are continuing to emphasize bank oversight of third parties, notes Kristine M. Andreassen, associate at Bryan Cave LLP and Paybefore Legal contributing editor. What s more, she says, any type of credit product seems to be a focus for regulators lately, whether or not it is linked to prepaid. What may be most concerning from a prepaid standpoint, however, according to Andreassen, is that Comptroller Curry's letter says that one of the factors posing heightened risks is that the arrangement between Urban Trust and CheckSmart has almost all Urban Trustissued Insight cards being sold at CheckSmart locations. Help Potential Clients Find You Advertise in Paybefore Buyer s Guide to reach the most potential clients for your prepaid or emerging payments business. Contact Marilyn Bochicchio via or phone at Payza s Bangladesh Remittance Service Booming Since launching an international remittance program in Bangladesh earlier this year, online payment platform Payza has seen what it calls unprecedented growth in the number of international payments directed into the country. The country s central bank, meanwhile, has raised the receiving limit for transfers from abroad from $500 to $2,000. Payza says its program in Bangladesh is aimed at serving the nation s growing freelance IT sector by streamlining the international remittance process, thus making it easier for foreign firms to make remittances to Bangladeshi IT providers. Since implementing the service, which is integrated into the local banking sector, Payza has gained 250,000 new members in Bangladesh, the firm says. Payza CEO Alastair Graham said the establishment of the remittance platform was a way of providing an emerging market with access to the same level of international monetary transfer services as is enjoyed in developed markets. And with the success

3 Page 3 of 6 of the Bangladeshi program, Payza is looking to additional markets. In the global picture, Bangladesh is small, but it signifies our first presence in that area and the integration into local banking that we re keen to do, Graham tells Paybefore. It shows we can deliver this level of financial services in emerging markets, which we believe puts us at the forefront of the online payments market. Amex Aims to Be First Bankcard in Apple Passbook American Express is poised to become the first financial services player to place its payment cards inside Passbook, Apple Inc. s new wallet app that launched less than a week ago with Apple s latest operating system. Amex today will join about a dozen other companies that have created customized Passbook apps enabling iphone users to check the status of accounts as well as scan and redeem coupons, tickets and boarding passes, according to a report in VentureBeat. Though Amex s Passbook app will not enable payments, it provides users with many of the same features already available on Amex s mobile app, including immediate notification of transactions and account balance data. Apple did not include NFC in its latest model, the iphone 5, which has sold some 5 million units since Sept. 21. But Passbook, compatible with most iphones sold within the last three years, is driving a fair amount of buzz since its launch Sept. 19, analysts note. Starbucks Inc. also will roll out a Passbook app within the next several days, industry reports suggest. Apple demonstrated a prototype Starbucks app when it launched the operating system. Amex s participation in Passbook underscores the growing variety of channels for mobile payments, Brian Riley, senior research director with CEB TowerGroup, tells Paybefore, pointing to Amex s flexibility and support of multiple mobile strategies such as Serve, its mobile payments platform that includes a prepaid option. The Apple alignment is one of many possibilities for Amex, Riley says. And as more marketers come aboard Passbook, Google Wallet may be losing momentum for its plans to challenge Apple with its own, similar wallet. The ultimate play that we expect to see for Google is to become the wallet of wallets that can intertwine other payment wallets, Riley suggests, but Google must act quickly to capitalize on consumer interest in the concept, he says. Western Union Products Rolling out to Always Money Locations The Western Union Co., an Englewood, Colo.-based provider of global payment services, announced an agreement with Montgomery, Ala.-based financial services company Triton Management Group Inc. to offer Western Union global money transfer and money order services and Western Union GPR prepaid cards to more than 100 Always Money-branded locations in Mississippi, Alabama and South Carolina Paybefore Award-winning Western Union MoneyWise Prepaid MasterCard and Gold

4 Page 4 of 6 Card Prepaid MasterCard cards will be available at all Always Money locations in those three states, and certain locations also will carry the co-branded Western Union Telemundo and mun2 GPR prepaid MasterCard cards. Our new relationship with Western Union enhances the great variety of financial services already offered at Always Money, said Frank Evans, founder and CEO of Always Money, a division of Triton Management Group. Our commitment to providing exceptional customer service combined with the quality of Western Union is a winning combination that will further help us meet customers wide variety of financial needs. Facebook Extends Mobile Payments to Three Continents via Bango Facebook Inc. is simplifying and expanding its system enabling users to make in-app payments and bill them to their mobile network operators through a newly public deal with Bango Inc. The social media giant has teamed up with Bango, with offices in the U.K. and U.S., to offer streamlined mobile Web carrier billing in both of those countries as well as in Germany, beginning today, Bango said in a regulatory filing. The service will extend to other countries later this year, the company said. Bango last February disclosed it was partnering with Facebook for mobile carrier-billed payments. So far Facebook s mobile carrier billing option is limited to purchases of digital content, such as virtual gifts and game credits, but Bango said its one-click service is faster than certain other mobile carrier billing services that require several steps to complete. Bango offers similar payment services through other platforms including BlackBerry App World, Opera Mobile Store and has operator-led connections to Google Play, the company said. While Facebook s broad consumer coverage tends to magnify the significance of its payments moves, analysts point out that services that bill in-app payments to mobile carriers are not new. We ve seen many examples of carrier billing solutions for digital content, because it is such an easy way for just about anyone to pay, Todd Ablowitz, founder and president of consulting firm Double Diamond Group, tells Paybefore. The typical mobile carrier-directing payment service tends to be more expensive than paying with a credit or debit card, but the fact that it reaches more people and requires very little effort to use has been the main selling point, he adds. Discover Bank Settlement with FDIC, CFPB Serves as Warning to Prepaid Discover Bank, a subsidiary of Riverwoods, Ill.-based Discover Financial Services, has reached an agreement with the FDIC and CFPB related to a determination by the two federal agencies that Discover engaged in deceptive telemarketing tactics to sell the company s credit card add-on products, such as payment protection, credit score tracking, identity theft protection and wallet protection. The agreement requires the company to provide refunds of approximately $200 million to cardholders who purchased the products by telephone from December 2007 to August 2011, and calls for certain enhancements to the company s marketing

5 Page 5 of 6 practices. The company will pay an additional $14 million in civil penalties to be split between the FDIC and the CFPB. The investigation concluded that Discover s telemarketing scripts contained misleading language likely to deceive consumers about whether they were actually purchasing a product, according to a joint statement. Discover s telemarketers also often downplayed key terms and spoke quickly during the part of the call in which the prices and terms of the add-on products were disclosed. Discover s telemarketing practices involved a third-party vendor, as well as internal company marketing, a Discover spokesperson confirms with Paybefore. The announcement is another example of regulators keeping tabs on banks third-party relationships. In July, the CFPB hit Capital One with an enforcement action for its vendors engaging in deceptive marketing practices related to the sale of add-on products for its credit cards. And, last month, the FDIC reached settlements with Higher One Inc. and The Bancorp Bank for an alleged 2010 violation of the Federal Trade Commission Act stemming from Higher One s OneAccount, a student debit card program. There s no doubt that the CFPB has zero tolerance for aggressive marketing and sales tactics it believes mislead consumers into paying for add-on products, Amy R. Lauck, a partner in the banking and financial services group at Lindquist & Vennum PLLP based in Minneapolis, tells Paybefore. Though the Capital One, Higher One and Discover settlements pertain to credit or debit products, Lauck says the CFPB already has indicated that institutions offering similar add-on products in connection with their deposit products will be held to the same standards. Prepaid card issuers marketing ancillary products must ensure that the cost, benefits and other key product terms are clearly disclosed to cardholders prior to purchase and cardholders affirmatively consent to any related charges, she says. Given the CFPB s current focus on GPR cards, there s a good chance regulators will soon be homing in on prepaid card issuers who market these types of ancillary products, if they have not done so already. The Buzz The top five most-read stories on Paybefore.com in the past week are: The Starbucks Effect: More Merchants Eye Closed-Loop Prepaid Mobile Payment Apps Viewpoint: The Thing about Marketing Editor's Note: Paybefore Expands into Emerging Payments Google Drops Prepaid Card from Wallet Western Union, MasterCard Create Largest Reload Network in U.S. Follow Paybefore:

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