CASH 2018 Annual Report

69 Risks Related to the Bank's Divisions The Bureau's Prepaid Accounts Rule impacts the Bank’s offering of prepaid cards. As described above, the Bureau issued a final rule on October 5, 2016, which supplemented the existing regulatory framework pursuant to which prepaid products (both cards and other delivery methods, including codes) are offered and serviced. The Prepaid Accounts Rule brought prepaid products fully within Regulation E, which implements the federal Electronic Funds Transfer Act, and, for prepaid products that have a “credit” component, within Regulation Z, which implements the federal Truth in Lending Act. The Prepaid Accounts Rule created tailored provisions which (i) created a definition for a “prepaid account” in Regulation E, (ii) required certain disclosures to consumers before such consumer acquires a prepaid card account, (iii) extended Regulation E’s limited liability and error resolution provisions to certain registered prepaid accounts, (iv) regulated the provision of billing statements, and (v) extended Regulation Z’s credit card rules and disclosure requirements to prepaid accounts that provide overdraft services and other credit features (the Bank currently issues a card with an overdraft feature that is marketed by a third party program manager.) The Prepaid Accounts Rule also requires account issuers to post their publicly offered prepaid card program agreements on their own websites and make them available to consumers upon request and to provide copies of all publicly offered prepaid card program agreements to the Bureau. The Prepaid Accounts Rule became effective on October 1, 2017, although the general effective date for compliance has been extended by the Bureau to April 1, 2019. Compliance with the Prepaid Accounts Rule has resulted in additional costs which we expect to continue to grow. Prepaid card issuers like the Bank are subject to heightened regulatory scrutiny based on AML and Bank Secrecy Act concerns. There is a concern within the bank regulatory environment over the use of credit and, in particular, prepaid cards as a means by which to illegally launder and move money. The U.S. Treasury’s Financial Crimes Enforcement Network issued rules related to providers of “prepaid access” which have left certain issues unresolved related to its regulatory requirements. It is likely that any changes to the regulatory environment related to the offering of prepaid cards will increase the Bank’s compliance and operational costs. Although the Bank will continue to work with its regulators to provide information about its operations as well as the state of the prepaid card industry, we believe such concerns in general will continue for the foreseeable future for the entire banking industry, with a continued emphasis on heightened compliance expectations, resulting in higher compliance costs. See Part I, Item 1“Business Regulation - Bank Supervision and Regulation.” Our tax refund-related business is concentrated in a limited number of partners, and our success will depend upon the maintenance of those agreements. If any of our relationships with the companies through which we offer tax refund-related products to consumers and commercial entities were to significantly decrease, such a decrease would likely have a significant adverse impact on our financial condition. For example, the Bank’s agreement with Jackson Hewitt Tax Service extends through the 2020 tax season, but the loss of this relationship prior to such time for a contractual or other reason would have a materially adverse impact on the Bank’s results of operation.