Green Dot Seeks $90 Million in Sallie Mae Prepaid Card Breach of Contract Suit (Sept. 4, 2013)
Sept. 4, 2013
Green Dot Corp. is seeking $90 million in damages from Sallie Mae in a lawsuit claiming the student loan giant misled Green Dot about the prospects for a prepaid card the two companies announced last year to help colleges disburse student financial aid refunds that Sallie Mae pulled the plug on. In a breach of contract suit filed Aug. 30 in New York State Supreme Court in Manhattan, Green Dot alleges that Sallie Mae forced it to lose business through an exclusivity deal and rack up significant costs while developing the My Flex Card by Sallie Mae, a reloadable prepaid card students could use as an option for receiving leftover financial aid funds. Sallie Mae on May 7 sold its campus card operations to Higher One Holdings for $47.25 million in cash and as part of the deal Sallie Mae canceled its agreement to market the My Flex Card, according to the lawsuit. Higher One markets its own service to disburse student loan funds called OneDisburse Refund Management.
Green Dot accuses Sallie Mae of “using and abusing” the prepaid card provider by disavowing its contractual obligations and dumping the card Green Dot began developing in 2011 at Sallie Mae’s request. Sallie Mae demanded exclusivity, preventing Green Dot from competing in the higher education market, and provided Green Dot with forecasts suggesting the likelihood of generating profits over the next four years from the card, the lawsuit says. Sallie Mae also delayed the product’s launch for five months, claiming more testing was needed, while it negotiated the sale of its campus card operations, Green Dot claims. “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,” Green Dot said in its lawsuit. A Green Dot spokesperson tells Paybefore the company has no further comments, noting that the complaint filed against Sallie Mae “speaks for itself.” Sallie Mae could not be reached for comment by presstime.