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November 3, 2010

Now that the GOP has won the majority in the House of Representatives, Rep. Spencer Bachus seems poised to assume control of the House Financial Services Committee.

The Financial Services committee had been chaired by Rep. Barney Frank. It was the wellspring of the Dodd-Frank Act. Frank won his district and will continue to serve in the committee, but the customs of the House allow the majority party to control most of the affairs of the body. Bachus is in, Frank is out, and the rest is yet to come.

Tea Party activism may have powered much of the change that led to the new House, but they won't find

October 21, 2010

MetaBank is wasting no time in attempting to collect on the outstanding balances on their now closed i-advance lines of credit.

How MetaBank would collect on the i-advances that were extended to existing customers has been a question ever since the OTS' action against the thrift from Storm Lake. The Office of Thrift Supervision's October 12th Supervisory Directive forced MetaBank to close existing i-advance accounts. On its website, MetaBank acknowledged that it was not sure how well they would be able to pull back their loans.

MetaBank published an 8-K later that day which warned investors about the situation.

We cannot predict with assurance whether and to what extent the OTS will address the compliance and supervisory matters in addition to those described above. However, the OTS has informed us that it will address in the future its expectations with respect to reimbursement of borrowers under the iAdvance program. It is anticipated that the

October 20, 2010

The success of NetSpend's IPO, with shares finding a price of $11, has now been echoed and perhaps even amplified by the subsequent demand for those shares during the first two days of their trading on the open NASDAQ.

October 19, 2010

There may not be much legal basis for HSBC's hesitancy to provide financial products for H&R Block, but the exchange of letters and the court documents generated by the dispute are still very telling.

HSBC has failed to perform a number of steps necessary for the fulfillment of their retail distribution agreement (the "RDA"). Block expected HSBC to provide a template for a RAL and RAC application form by September 1st, along with a list of fees for those products. On September 15th, Block expected to have HSBC's underwriting criteria for refund anticipation loans, as well as a template for disclosure statements that are programmed into the tax preparation software used by Block staff.

John Butler of HSBC sent a letter to the assistant Vice-President for Settlement Products at H&R Block on August 30th. Butler wrote that the agreement terms state that "the Settlement Products Program must be consistent with safe and sound banking practices." There was no specific factor given for what constituted a lack of such sound practices, but it is fairly easy to see the reference: the IRS had suspended the debt indicator on August 5th.

Unfortunately for HSBC, their contract doesn't give HSBC room to make that statement. There is a portion of the RDA that covers termination which gives either party grounds to quit the contract if there is some change in how the IRS sanctions RALs and RACs. Here is

October 18, 2010

NetSpend will move some of its prepaid card business away from MetaBank.

In a filing today, NetSpend indicated that it has signed non-binding agreements with The Bancorp Bank (TBBK) and H&R Block Bank.

Since October 6th, NetSpend concluded that the OTS' Supervisory agreement restricted the ability of MetaBank to service any new relationships with MetaBank distributors. In other words, if NetSpend reached an agreement to put its cards in the offices of a retailer, they would not be able to use MetaBank as the issuer of that card. NetSpend has new distribution partnerships in the works, so the ruling

October 14, 2010

The concern by the Office of Thrift  Supervision which culminated in its issuance of Supervisory Directive on Tuesday evening was not the product of a quick reaction.

MetaBank's partnership with NetSpend to offer the i-advance goes back for some time.

MetaBank's partnership with Santa Barbara Tax Products Group extends to tax season 2010. On August 10th, the two companies signed a new multi-year agreement. It signaled a new level of involvement. MetaBank agreed to offer refund anticipation loans through the facilitation of SBTPG.

We submitted an initial set of comments that we made to the Office of Thrift Supervision about MetaBank back in March.

Today, MetaBank's business model is facing a set of new challenges.  They cannot make those refund loans for

October 14, 2010

NetSpend will not go forward with an initial public offering of 18.5 million shares of its stock. NetSpend's struggles point to regulatory problems with their card issuance partner, MetaBank.

They had hoped to fetch between $10 and $12 per share for the prepaid card company.

September 22, 2010

The prepaid card is about to tackle one of the more challenging issues for prison re-entry. Continental Prison Systems (CPSZ:PK) , a $4.6 million start up in California, offers a banking system for inmates. They call it the E-Z Card & Kiosk. The company installs kiosks inside state prisons and then issue debit cards to inmates. They refer to the system as the "cashless jail."

Prisons and their prisoners face some unique challenges. It costs a lot of money for prisons to write checks. According to CPSZ, it can cost as much as $17 per check. Hard to believe, but then again, who's counting? It is easier to see why a debit card would help prisoners. Even though prisoners can live

September 10, 2010

New data on lending at Prosper reveals how peer-to-peer lending is changing. The volume and amount of lending would appear to be on the rise. Some things are still the same: most often, Prosper's borrowers are using the loans to consolidate outstanding debts, to get a small business loan, or to improve their home. Prosper facilitated just over $201 million in loans in the last 12 months, but more than $21 million during July 2010. If you assume that there is little difference in broader demand for credit in July than at other times of the year, then those numbers would suggest Prosper is drawing more consumers. Mix of customers is perhaps the most interesting thing about the new data. It seems

September 3, 2010

No one can know what to expect from the  Office of Thrift Supervision over the next ten months.

The Dodd-Frank bill spells out the end for the OTS. Thrifts under its supervision will all have a new primary regulator. Most will become supervised by the Office of the Comptroller of the Currency. State-chartered thrifts, of which there are only about fifty, will become the concern of the FDIC. The others will move to the care of the Federal Reserve.

Those changes won't happen until the summer of 2011. In the time between, thrifts will

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