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2014-01-24 SEC Comment Letter Response

January 24, 2014

Via EDGAR AND OVERNIGHT DELIVERY

United States Securities and Exchange Commission

Division of Corporation Finance

100 F Street, N.E.

Washington, DC 20549

Attention:

Gus Rodriguez, Accounting Branch Chief

Marc Thomas, Staff Accountant

Re:

Green Dot Corporation

Form 10-K for Fiscal Period Ended December 31, 2012

Filed March 1, 2013

Form 10-Q for the Period Ended September 30, 2013

Filed November 8, 2013

File No. 001-34819

Gentlemen:

This letter responds to the comments of the Staff of the Securities and Exchange Commission (the “Staff”) set forth in the letter dated December 31, 2013, from Mr. Gus Rodriguez to Mr. Steven W. Streit of Green Dot Corporation (the “Company,” "we," "our" and "us"). For your convenience, we have set forth below each of the Staff's comments in italicized text in the same numbered order in which they appear in your letter. Our response to each Staff comment follows immediately after the text of the corresponding comment. References to page numbers in our responses are references to the page numbers in the applicable periodic report.

Form 10-K for Fiscal Period Ended December 31, 2012

Notes to Consolidated Financial Statements

Note 21 - Selected Unaudited Quarterly Financial Information, page 86

1.

We note the disclosures that during the fourth quarter of 2012, the company implemented new control procedures over the settlement of cardholder funds. As a result of these new controls, an error was identified relating to the calculation of overdrawn account balances that affected the financial results for the first, second and third quarters of

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2012. The company determined that the effects of the error were not material to any previously reported period but the cumulative effect of correcting the error in the fourth quarter of 2012 would be material. As it relates to the error identified, please address the following:

•

Address why the quarterly disclosures only address the 2012 interim periods when the fourth quarter of 2011 was also impacted by the error;

•

Provide us with the adjusting entries made to the 4th quarter of 2012 financial statements to correct the error and any related memos that describe the nature of the adjustments;

•

Explain to us, in specific detail, the nature of the new internal controls implemented that led to the identification of the error relating to the overdrawn account balances;

•

Tell us whether the errors helped you to meet or exceed projected earnings for any of the quarters impacted by the error, and

•

Provide us with your materiality analysis for all of the periods impacted by the error.

Response

To address each of the Staff’s comments above, our response is organized as follows:

•

Summary of accounting for overdrafts

•

Overview of the error

•

Identification of the error

•

Our assessment of internal control over financial reporting

•

Our assessment of materiality

•

Conclusion

Overview of accounting for overdrafts

We charge our cardholders maintenance fees on a monthly basis pursuant to the terms and conditions in our cardholder agreements. Each month, we systematically determine which cardholder accounts are eligible for a maintenance fee, transmit the information to the banks that issue our cards (“card issuing banks”), recognize maintenance fee revenue, a component of card

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revenues and other fees on our consolidated statement of operations, and collect the cash from the card issuing banks. A portion of the maintenance fees assessed and collected may have been in excess of a cardholder’s account balance, resulting in “overdrafts” to the extent the account balance is negative. Cardholder account overdrafts may also arise from purchase transactions that we honor in excess of the funds in a cardholder's account. The card issuing banks fund all overdrawn account balances on our behalf and we are responsible to the card issuing banks for any losses associated with these overdrafts. On our consolidated balance sheets, we include our obligations to these banks as amounts due to card issuing banks for overdrawn accounts and we include a receivable due from cardholders as overdrawn account balances due from cardholders, a component of accounts receivable, net. We are exposed to unrecovered cardholder account overdrafts. Accordingly, we establish a reserve for uncollectible overdrawn accounts. We include our provision for uncollectible overdrawn accounts related to maintenance fees and purchase transactions as a component of card revenues and other fees and other general and administrative expenses, respectively, in our consolidated statement of operations.

For additional information, please refer to our accounting policies disclosed under "Critical Accounting Policies and Estimates" in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, and Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements to our Form 10-K for the year ended December 31, 2012.

Overview of the error

We outsource our card processing to a third party and rely on the data maintained on its system for a variety of business and other processes, including our financial reporting processes (our “third-party processor”). At the end of each month, we extract overdrawn account balance data from our third-party processor, which we use to record the amounts due to card issuing banks for overdrawn accounts and overdrawn account balances due from cardholders, a component of accounts receivable, net, on our consolidated balance sheet. We also use the data to calculate our reserve for uncollectible overdrawn accounts and the related provision.

In December 2012, we became aware that our extract of overdrawn account balance data was incomplete. When we extract the overdrawn account balance data from our third-party processor, we exclude certain tables that had historically contained duplicate data ("excluded data tables"). Our third-party processor made database configuration changes to correct the excluded data tables that we were unaware of. In the fourth quarter of 2011, the excluded data tables were repurposed

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to include data for a new general purpose reloadable prepaid debit card program. Initially, the volume of overdrawn account balance data contained in these excluded data tables was small (i.e., less than $400,000 in the fourth quarter of 2011), but grew gradually over the course of 2012. This new overdrawn account balance data was not included in our monthly data extract and, therefore, was not included in the financial statements from the fourth quarter of 2011 through the third quarter of 2012. Consequently, certain financial statement captions were understated.

The error affected the following prior period financial statements:

•

Three and twelve months ended December 31, 2011

•

Three months ended March 31, 2012

•

Three and six months ended June 30, 2012

•

Three and nine months ended September 30, 2012

We disclosed the impact of the error and the adjusting entries for the 2012 interim periods in Note 21 - Selected Unaudited Quarterly Financial Information to our December 31, 2012 consolidated financial statements. As noted by the Staff, our disclosures in Note 21 did not address the impact of the error on the fourth quarter of 2011. We did not restate this prior period because the impact to net income was less than $400,000, or less than 3% of net income for the quarter, and the impact to amounts due to card issuing banks for overdrawn accounts and overdrawn account balances due from cardholders was $998,000 and $420,000, respectively.

Identification of the error

As noted in our disclosures, we identified the error as a result of implementing new controls. In November 2012, we completed the transition of all outstanding customer deposits associated with our Green Dot-branded GPR card program with Columbus Bank and Trust Company, a division of Synovus Bank, to our subsidiary bank ("Green Dot Bank"). In conjunction with this transition, we implemented new controls over the settlement of cardholder funds with Green Dot Bank. Specifically, we began reconciling the overdrawn account balance data extracted from our third-party processor to cash settlement reports and identified a reconciling balance. Upon further review, we determined that the reconciling difference related to the incomplete overdrawn account balance data.

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The internal controls we had in place prior to fourth quarter of 2012 were designed to prevent and detect errors associated with the completeness of the overdrawn account balance data. However, these controls were unsuccessful in detecting the error because they were not designed to identify and verify the appropriateness of structural database changes. Furthermore, the error gradually accumulated in size over a relatively long period of time. Had the full magnitude of the error occurred over a relatively shorter period of time, we believe our analytical review procedures, which examine trends in various financial statement captions, would have identified the error in a timely manner.

Our assessment of internal control over financial reporting

We have determined that the identified error is the result of a control deficiency. We considered the guidance in PCAOB Auditing Standard No. 5, An Audit of Internal Control over Financial Reporting That Is Integrated with an Audit of Financial Statements, in determining whether the significance of the deficiency rises to the level of a material weakness. We considered how the error was identified, the magnitude of the error and the likelihood of it reoccurring, the existence of mitigating controls, whether those controls could have prevented or detected the error and whether there is evidence that the mitigating controls were operating effectively. We do not believe the deficiency is a material weakness for the following reasons:

•

We identified the error before it became material and promptly brought to the attention of the external auditors and our Audit Committee;

•

The error did not materially impact the financial information previously reported in our 2011 Annual Report on Form 10-K;

•

We have implemented new controls in conjunction with the outstanding customer deposits transition described above. These controls identified the error, remediated the control deficiency prior to year end, and supplements our existing controls to ensure we have a complete data population for our reserve calculation going forward;

Therefore, our previous internal control disclosures in prior filings remain adequate as the effectiveness of disclosure and control procedures continue to be appropriate.

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Our assessment of materiality

We calculated the magnitude of the error in each of the periods above and assessed materiality based on the guidance in Accounting Standards Codification, or ASC, 250, Accounting Changes and Error Corrections, ASC 270, Interim Reporting, and Staff Accounting Bulletin, or SAB, Topic 1, Financial Statements.

We evaluated the effect of the error on our current and prior period consolidated financial statements, taking into consideration both the iron curtain method and the rollover method described in SAB Topic 1.N, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements.

As an initial basis for our quantitative assessment, we used 5% of income before income taxes as a threshold for evaluating whether the error was material. We also considered the impact of the error on significant financial statement captions in the first, second and third quarter of 2012, as follows:

Adjustments

Income statement caption

As Reported

$

%

As Adjusted

(In thousands, except percentage data)

Three months ended March 31, 2012

Card revenues and other fees

$

62,373

$

(1,151

)

(1.8

)%

$

61,222

Other general and administrative expenses

$

15,904

$

0.4

%

$

15,968

Income before income taxes

$

27,788

$

(1,215

)

(4.4

)%

$

26,573

Income tax expense

$

10,672

$

(467

)

(4.4

)%

$

10,205

Net income

$

17,116

$

(748

)

(4.4

)%

$

16,368

Three months ended June 30, 2012

Card revenues and other fees

$

59,500

$

(1,638

)

(2.8

)%

$

57,862

Other general and administrative expenses

$

17,915

$

0.5

%

$

17,998

Income before income taxes

$

20,024

$

(1,721

)

(8.6

)%

$

18,303

Income tax expense

$

8,133

$

(699

)

(8.6

)%

$

7,434

Net income

$

11,891

$

(1,022

)

(8.6

)%

$

10,869

Three months ended September 30, 2012

Card revenues and other fees

$

54,138

$

(1,590

)

(2.9

)%

$

52,548

Other general and administrative expenses

$

18,050

$

0.3

%

$

18,109

Income before income taxes

$

17,488

$

(1,649

)

(9.4

)%

$

15,839

Income tax expense

$

6,875

$

(648

)

(9.4

)%

$

6,227

Net income

$

10,613

$

(1,001

)

(9.4

)%

$

9,612

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Page 7

Adjustments

Income statement caption

As Reported

$

%

As Adjusted

(In thousands, except percentage data)

Six months ended June 30, 2012

Card revenues and other fees

$

121,873

$

(2,789

)

(2.3

)%

$

119,084

Other general and administrative expenses

$

33,819

$

0.4

%

$

33,966

Income before income taxes

$

47,812

$

(2,936

)

(6.1

)%

$

44,876

Income tax expense

$

18,805

$

(1,166

)

(6.2

)%

$

17,639

Net income

$

29,007

$

(1,770

)

(6.1

)%

$

27,237

Nine months ended September 30, 2012

Card revenues and other fees

176,011

(4,379

)

(2.5

)%

$

171,632

Other general and administrative expenses

51,869

0.4

%

$

52,075

Income before income taxes

65,300

(4,585

)

(7.0

)%

$

60,715

Income tax expense

25,680

(1,814

)

(7.1

)%

$

23,866

Net income

39,620

(2,771

)

(7.0

)%

$

36,849

Adjustments

Balance sheet caption

As Reported

$

%

As Adjusted

(In thousands, except percentage data)

As of March 31, 2012

Accounts receivable, net (current portion only)

$

46,996

$

1,436

3.1

%

$

48,432

Income tax receivable

$

1,612

$

29.0

%

$

2,079

Amounts due to card issuing banks for overdrawn accounts

$

42,947

$

2,651

6.2

%

$

45,598

Retained earnings

$

138,857

$

(748

)

(0.5

)%

$

138,109

As of June 30, 2012

Accounts receivable, net (current portion only)

$

44,637

$

1,645

3.7

%

$

46,282

Income tax receivable

$

2,705

$

1,166

43.1

%

$

3,871

Amounts due to card issuing banks for overdrawn accounts

$

45,651

$

4,581

10.0

%

$

50,232

Retained earnings

$

150,748

$

(1,770

)

(1.2

)%

$

148,978

As of September 30, 2012

Accounts receivable, net (current portion only)

$

43,428

$

1,435

3.3

%

$

44,863

Income tax receivable

$

$

1,814

219.9

%

$

2,639

Amounts due to card issuing banks for overdrawn accounts

$

49,117

$

6,020

12.3

%

$

55,137

Retained earnings

$

161,361

$

(2,771

)

(1.7

)%

$

158,590

The significance of the error was magnified during the second and third quarters of 2012 because we experienced a significant decrease in our opera