Credit and Debit Card Ratings

Green Dot Sues Sallie Mae Over Prepaid Deal

When the partnership between prepaid debit card issuer Green Dot Corporation and student loan giant Sallie Mae Corporation was first announced last August the superlatives were abundant. The roll out of the My Flex prepaid debit MasterCard by Sallie Mae – a product made possible by a partnership deal with Green Dot – was touted as a way for college students to quickly, cheaply and easily receive financial aid refunds. “Students deserve easy, secure and transparent choices that don’t cost them money to get their money,” enthused Sallie Mae senior vice president Kelly Christiano, in a press release announcing the card. “Sallie Mae is committed to providing financially responsible products that are transparent and easy to understand for students and schools.”

The good feelings between Sallie Mae and Green Dot are long gone now. Indeed, according to a report in Courthouse News, Green Dot has sued its former partner for $90 million in New York County Supreme Court. According to the story, written by reporter Nick Divito, who quotes extensively from the Green Dot lawsuit, the two companies had been in negotiations since late 2011 to form a partnership that allowed students to receive financial aid refunds on reloadable prepaid debit cards issued by Green Dot. This option was intended to be a part of Sallie Mae’s Campus Solutions business.

However, according to the lawsuit, Sallie Mae made the deal contingent upon Green Dot both abandoning any other initiatives aimed at the higher education industry as well as paying the bulk of the tab for the partnership itself. Sallie Mae, the report says, assured Green Dot that the upfront costs and exclusivity would be worth it because the partnership would yield sufficiently high returns.

But according to the lawsuit, Sallie Mae was simply using its proposed partnership with Green Dot as a way to raise the value of its money-losing Campus Solutions business, which it subsequently sold for $50 million, a move that “blindsided” Green Dot. “Thus, Sallie Mae targeted Green Dot as a contractual partner to bundle its struggling business with Green Dot’s commercially attractive, well-known prepaid cards,” the lawsuit says.

And now, Green Dot wants Sallie Mae to pony up for lost net profits and money wasted getting the My Flex prepaid card up and running. Green Dot seeks $90 million in damages for breach of contract. In summarizing its case, the Green Dot lawsuit reads more like a letter from a jilted lover than a dry court document. “This is a case about the largest provider of financial services to the higher education industry in the United States using and abusing a business partner for its own collateral goals, casting that business partner aside and brazenly disavowing its contractual obligations when those goals were realized.”

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  • Green Dot Sues Sallie Mae Over Prepaid Deal

    Green Dot Sues Sallie Mae Over Prepaid Deal

    When the partnership between prepaid debit card issuer Green Dot Corporation and student loan giant Sallie Mae Corporation was first announced last August the superlatives were abundant. The roll out of the My Flex prepaid debit MasterCard by Sallie Mae – a product made possible by a partnership deal with Green Dot – was touted as a way for college students to quickly, cheaply and easily receive financial aid refunds. “Students deserve easy, secure and transparent choices that don’t cost them money to get their money,” enthused Sallie Mae senior vice president Kelly Christiano, in a press release announcing the card. “Sallie Mae is committed to providing financially responsible products that are transparent and easy to understand for students and schools.”

    The good feelings between Sallie Mae and Green Dot are long gone now. Indeed, according to a report in Courthouse News, Green Dot has sued its former partner for $90 million in New York County Supreme Court. According to the story, written by reporter Nick Divito, who quotes extensively from the Green Dot lawsuit, the two companies had been in negotiations since late 2011 to form a partnership that allowed students to receive financial aid refunds on reloadable prepaid debit cards issued by Green Dot. This option was intended to be a part of Sallie Mae’s Campus Solutions business.

    However, according to the lawsuit, Sallie Mae made the deal contingent upon Green Dot both abandoning any other initiatives aimed at the higher education industry as well as paying the bulk of the tab for the partnership itself. Sallie Mae, the report says, assured Green Dot that the upfront costs and exclusivity would be worth it because the partnership would yield sufficiently high returns.

    But according to the lawsuit, Sallie Mae was simply using its proposed partnership with Green Dot as a way to raise the value of its money-losing Campus Solutions business, which it subsequently sold for $50 million, a move that “blindsided” Green Dot. “Thus, Sallie Mae targeted Green Dot as a contractual partner to bundle its struggling business with Green Dot’s commercially attractive, well-known prepaid cards,” the lawsuit says.

    And now, Green Dot wants Sallie Mae to pony up for lost net profits and money wasted getting the My Flex prepaid card up and running. Green Dot seeks $90 million in damages for breach of contract. In summarizing its case, the Green Dot lawsuit reads more like a letter from a jilted lover than a dry court document. “This is a case about the largest provider of financial services to the higher education industry in the United States using and abusing a business partner for its own collateral goals, casting that business partner aside and brazenly disavowing its contractual obligations when those goals were realized.”

  • Risky New Bank Card Technology – Is Your Card At Risk?

    Risky New Bank Card Technology – Is Your Card At Risk?

    Though it may be convenient to pay with a wave of your credit or debit card, Consumer Report’s Andrea Rock says so-called contactless cards make your personal information vulnerable.  Whether you know it or not, your credit or debit cards might contain a tiny computer chip and radio antennae to transmit account information from your card, even when you’re not shopping.

    Thieves can steal your credit card information from only a few inches away using a card reader that sells for less than $100.  By simply transferring your account number, expiration date and security data to a computer and transferring it to blank cards, a counterfeit can be made of your card. Thieves can then make successful transactions using your “card” while it’s still in your wallet.

    So how do you know if your cards use this technology? Chase cards calls their contactless cards “Blink”, MasterCards uses “Pay Pass” to identify its contactless cards, and others simply have a symbol consisting of four curved lines like the one shown below.

    rfid

    An industry newsletter, The Nilson Report, says 35 million contactless chip cards are in circulation in the United States alone. The cards are touted as being convenient, but are vulnerable to skimming without ever leaving your wallet.

    The technology is active weather you know you have it or not. Shields of wallets marketed as RFID-blocking devices can make it more difficult for someone with an electromagnetic reader to read your cards, but they don’t entirely block transmission of card data. Another option is a protective sleeve made out of duct tape lined with aluminum foil. Tests show that it worked better than many of the ones you can buy, but even that didn’t block the signal completely. So while waiving your card is easy, making sure it’s secure is not. There’s not much you can do but ask your bank to replace the card with one that does not have this technology.

    Chase spokesman Paul Hartwick says the security codes on its contactless cards are designed to change with every transaction, as they are with most RFID-enabled cards, so that even if a card is counterfeited, it would work for only one fraudulent transaction.

    “If I put a reader next to a turnstile at Grand Central Terminal at rush hour, I could probably capture data from 5,000 cards that evening, and what you’re getting from each one is enough to initiate a transaction,” says Mark Rasch, a former Justice Department computer-crime prosecutor who serves as director of cybersecurity and privacy consulting at CSC, a business technology firm. “Moreover, repeatedly scanning a card that is lost, stolen or intercepted in the mail produces multiple security codes,” Paget says.

    The Smart Card Alliance, an industry group, maintains that contactless card technology deployed by American Express, Discover, MasterCard, and Visa is secure and that there have been no reports of consumers been victimized. American Express says its contactless cards do not reveal the card account number, and demonstrations supported this.

    According to Kevin Fu, a University of Massachusetts at Amherst assistant professor, the absence of a flood of fraud reports linked to the cards is not proof of their security. Because the contactless cards in circulation in the U.S. represent only 3.5 percent of the total debit and credit cards in use, they have not yet presented a big enough target to lure many crooks, especially when traditional magnetic stripe cards are so especially counterfeited.

    For more information, visit:

    http://www.consumerreports.org/cro/magazine-archive/2011/june/money/credit-card-fraud/rfid-credit-cards/index.htm

Credit and Debit Card Ratings