Senators Call on Regulators to Investigate Payroll Cards (July 15, 2013)
July 15, 2013
A group of 16 U.S. Senators are calling on government regulators to investigate the fees and practices association with payroll cards. In a letter to the Consumer Financial Protection Bureau and Department of Labor, the Senators said that all fees attached to prepaid cards must be clearly disclosed to employees who have their pay loaded onto such products. “No workers—and especially lower income workers—should have to worry about hidden fees taking a bite out of their hard-earned paychecks,” said Sen. Robert Menendez (D-NJ), one of the letter’s authors.
The Senators’ letter came in the wake of the news earlier this month that New York State Attorney General Eric Schneiderman was looking into payroll programs at some of the nation’s largest employers. That news followed closely on the heels of a story in the July 1 edition of the New York Times that characterized payroll cards as rife with hidden fees and claimed that employees were often coerced into enrolling in payroll card programs by their employers.
But such portrayals do not accurately describe the payroll card market as a whole, according to industry observers, who note that while payroll programs may include fees for out-of-network ATM transactions and/or card replacement fees, the cards are less expensive to use than check cashing services, which are the only alternative for employees who don’t have a bank account. “One reason payroll cards are so popular is that they save money for employees who otherwise might be paying check cashers to cash their paychecks or who end up carrying around large wads of cash, which is risky and unprotected,” notes Judith Rinearson, a partner at Bryan Cave LLP and chair of the Government Relations Working Group at the Network Branded Prepaid Card Association (NBPCA). “Certainly if these kinds of things are really happening—employees being forced to take payroll cards without the option of getting a direct deposit to their own bank account or being charged high fees just to access their wages—I think it’s worth investigating. But I haven’t seen this,” Rinearson tells Paybefore. Many federal and state laws protect employees, she notes, including regulations that require workers to have free access to their wages either through free teller withdrawals or free ATM withdrawals, or both.