Apple and Walmart banking partner Green Dot fined $44 million by the Federal Reserve

The Federal Reserve today announced it has fined Green Dot Bank, a partner to Apple and Walmart, for deceptive practices the bank says it stopped years ago.

Green Dot Bank, the tiny state-charted Utah bank behind financial products at some of America’s largest companies—including Apple and Walmart—today agreed to pay a $44 million fine previously disclosed by the Federal Reserve. Green’s stock fell 5.7% today to $9.26, and is now 85% off the all-time-high of $63.44 it hit October 2020. The fine does not place any restrictions on the bank’s ability to serve its existing clients.

In a statement published this afternoon the Fed said the fine was for “numerous unfair and deceptive practices and a deficient consumer compliance risk management program.” According to the statement, Green Dot violated consumer law in its marketing, selling, and servicing of prepaid debit card products, and its offering of tax return preparation payment services.

Specifically, Green Dot failed to adequately disclose the tax refund processing fee for tax preparation services offered on a third party’s website. Green Dot previously announced it had set aside $20 million to help cover the fine. Green Dot CEO George Gresham said in a statement the bank had been working closely with regulators to prepare for the public enforcement action.

“The order relates to practices in place years ago, and we have taken and will continue taking meaningful steps to correct and remediate those issues,” Gresham said in the statement. “Including significant updates to our processes, our product packaging and marketing.”

Fortune previously reported on Green Dot’s work with Apple and Walmart. The bank is part of a recent trend called banking-as-a-service, where chartered banks work with tech companies to help them build services only banks can offer.

Financial analyst Timothy Switzer of financial services broker-dealer Keefe, Bruyette & Woods wrote in an investor note that, while the fine is more than the bank initially set aside, it is below the maximum potential loss of $50 million estimated by the bank’s management. KBF estimates the additional $24 million will reduce earnings per share by between $0.35 and $0.44, depending on tax deductibility, representing a 23% to 30% decline relative to its current estimate.

“Importantly,” Switzer wrote, “the order did not place any restrictions on GDOT’s business operations, as management expected, indicating that the direct financial impact will be limited to investment requirements.”

In addition to the fine, the Federal Reserve Board is requiring that Green Dot hire an independent third-party to strengthen its consumer compliance risk management program, develop an effective anti-money laundering program, and hire an independent third-party to conduct a review of certain transaction activities.

The company’s second quarter earnings results are expected to be published on August 8, and should provide further information.