Trying to distance themselves from any appearance of being tied to METABANK/META PAYMENT SYSTEMS

Bank Freedom Drops MetaBank

April 04th, 2011

Bank Freedom will no longer use MetaBank as the issuer for its prepaid debit cards. Bank Freedom follows a similar move by NetSpend to move business away from MetaBank in the wake of the regulatory interventions made against the Storm Lake, Iowa savings bank by the Office of Thrift Supervision.

Bank Freedom isn’t the first to distance itself from MetaBank.

NetSpend has already begun to seek new relationships. Moreover, they have been fairly open about their motives. NetSpend CEO Dan Henry told analysts that his company had adopted a new diversification strategy to find new bank partners for their cards. At the time, MetaBank issued more than 70 percent of card accounts at NetSpend.

Moreover, as long as MetaBank is saddled with regulatory problems, then NetSpend cannot generate any new business with MetaBank partners.

“Based on further communications between MetaBank and OTS, we understand that the OTS Directives will require MetaBank to obtain OTS approval prior to MetaBank executing new third party agency agreements with new distributor relationships established by existing program managers such as NetSpend. This means that we will not, without MetaBank obtaining the prior written approval of OTS, be able to enter into new agreements with distributors that are also parties to a third party agency relationship with MetaBank. (Netspend 10-K, 3-2-11)

NetSpend signed a new agreement with The Bancorp Bank in January.

One odd thing which has largely gone unreported in articles by the American Banker is that NetSpend still owns 4.9 percent of the outstanding shares in MetaBank.

Bank Freedom is a subsidiary of PrePaid Card Holdings. PPCH is listed on the pink sheets as PPDC. That alone should tell you that MetaBank isn’t going to lose much sleep over the loss of Bank Freedom. BankFreedom reported $160,000 in net income in its most recent annual report. NetSpend transacted approximately $9.8 billion in gross dollar volume in 2010 and finished the year with 2.1 million active accounts.

More consumers should consider these cards. Bank Freedom cards are fairly consumer friendly: the cards are fully FDIC-insured, which is great, and they come with no activation fees. Signature transactions are free, in step with the broader trend across prepaid. There is no customer service fee. This is remarkable.

There is no monthly fee if you put $700 in cash on the card, or at least $350 a month in direct deposits.

On the other hand, it costs $4.95 a month to use the bill pay feature and there are additional charges if you use it more than 5 times a month. It basically costs $1 to use the bill pay until you reach the sliding scale, when it becomes 85 cents. There is also a $4.95 charge to load cash on to the card. Yikes!

BankFreedom uses the Green Dot network to reload its cards.

Filed under: debit cards,unbanked | Tags: Bank Freedom, cash, MetaBank, prepaid debit

It still appears as if consumers are handing over control of their own assets to an anonymous and unknown third party by using these prepaid bank cards that METABANK claims to have created originally…. Consumers need something else. Consumers need to take charge of their own finances. As a consumer, I am so often left in the dark regarding all of the ramifications of any financial choice I may make.

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