Federal banking regulators this thirty days cracked straight down on MetaBank, an important card that is prepaid, an action that tossed into concern the pending initial general general public providing of prepaid credit card program supervisor NetSpend Corp.

Austin, Texas-based NetSpend is planned to amount its long-planned IPO on Thursday, in accordance with reports in the economic cables. But its close ties to MetaBank caused rounds of conjecture about whether or not the IPO will in truth take place. A NetSpend representative states he can’t comment.

On Tuesday, MetaBank’s parent business, Storm Lake, Iowa-based Meta Financial Group Inc., reported towards the Securities and Exchange Commission that any office of Thrift Supervision had taken enforcement actions against MetaBank. The OTS banned MetaBank from issuing any brand brand new loans under its iAdvance item at the time of Wednesday, plus it put settings on its company of issuing loans prior to clients’ receipt of income tax refunds, alleged tax-refund expectation loans.

“The OTS recommended us on Oct. 6 so it has determined that the lender involved with unfair or acts that are deceptive techniques in breach of the Federal Trade Commission Act and OTS marketing laws relating to the bank’s operation of this iAdvance system and needed the lender to discontinue all iAdvance line-of-credit origination task by Oct. 13, 2010,” Meta Financial’s filing states.

The filing doesn’t provide information about exactly what the OTS available at fault with iAdvance, which can be a short-term loan product which MetaBank calls a “microloan” although some news reports call it a pay day loan. MetaBank provides the solution to NetSpend along with other clients for who it issues cards that are prepaid. The sheer number of such loans and their total receivables were maybe maybe not straight away available. An OTS representative declined to comment, and a Meta representative referred a Digital Transactions Information call to an executive whom didn’t react by belated Wednesday.

The filing additionally states that due to Meta’s third-party relationship risk, other risks, and its particular quick growth—growth the filing caused by the expansion to its Meta Payment Systems processing division—the OTS had been needing it to have approval from the local manager before it might participate in different company tasks. The business requires an OTS fine before it could get into brand brand brand new third-party relationships, originate brand new tax-refund loans, and even provide income-tax transfers throughout the 2011 income tax season.

The point is, Meta Financial stated the discontinuance of iAdvance plus the prospective discontinuance of tax-related programs now at the mercy of OTS approval would “eliminate a considerable portion” of Meta Payment Systems’ gross revenue. Meta’s stocks shut down 33percent on Wednesday.

The problem that is possible NetSpend is the fact that it really is so closely connected with MetaBank. NetSpend manages 2 million active prepaid cards, and MetaBank dilemmas 71% of these, relating to a filing the business made to your SEC a week ago in advance associated with the IPO. NetSpend holds 4.9percent of Meta Financial’s equity, an action this program manager took “in purchase to help expand align our strategic passions with MetaBank,” NetSpend’s filing claims.

Prepaid credit card researcher Tim Sloane of Mercator Advisory Group Inc. states he doubts iAdvance alone had been a product section of Meta’s business, but he notes that just Meta plus the OTS have actually the complete details. “It may be the OTS is wrestling with how exactly to handle prepaid in sponsoring banks, plus in figuring that out, they’ve placed these limitations set up,” he states.

Investment bank Morgan Stanley issued a study Wednesday saying Meta’s woes add up to an recommendation of this strategy of NetSpend competing Green Dot Corp., which will be when you look at the processing of purchasing a bank. “Better to stay control over your very own destiny,” Morgan Stanley said.

NetSpend intends to offer 2.27 million shares at $10 to $12 apiece, which would create $22.7 million to $27.2 million before underwriting costs. NetSpend’s present owners plan to offer 16.3 million stocks.