Payroll Card Industry Could See More Static, Legal Experts Warn (Nov. 7, 2013)
Payroll card industry participants should brace for more potential negative news as lawmakers and plaintiffs’ attorneys around the U.S. continue fishing for outlier examples of payroll card abuse, observers say. The industry’s antennae shot up earlier this week when Pennsylvania lawmakers followed through on an earlier promise and proposed legislation to ban payroll cards. Separately, a class-action lawsuit filed in California alleges a major U.S. apparel maker’s payroll card program charged employees inappropriate fees.
Legal insiders believe both developments stem primarily from news coverage earlier this year mischaracterizing payroll programs, following a lawsuit filed in Pennsylvania against a McDonald’s franchisee. The New York attorney general within two days of those reports announced an investigation, closely followed by a separate inquiry by federal lawmakers. And more such actions may be in the works.
“The majority of payroll card programs are in compliance with state and federal laws, but we are likely to see more proposed bills around payroll cards when states’ legislatures reconvene in January,” warns Cathy Beyda, of counsel with law firm Paul Hastings. Lawmakers in Ohio in late August drew up a bill suggesting employers with payroll cards would need to also offer employees the option of receiving their wages in cash, which would make payroll cards unworkable, she notes. Rumblings also are afoot in New Hampshire about a new bill to restrict payroll cards, Beyda adds. Many lawmakers are poorly informed about the positive benefits of payroll cards, which provide a valuable service for millions of unbanked and underbanked Americans, according to Beyda. “The goal for lawmakers should be enforcing existing state and federal rules around payroll cards, not drafting anti-payroll laws as a knee-jerk reaction to negative news,” she says.
Payroll card industry players need to take action now in helping to combat misinformation, Brad Fauss, executive vice president and industry counsel for Brightwell Payments, tells Paybefore. “We need to aggressively promote the positive attributes of the product before it is legislated away by well-meaning but uninformed lawmakers,” he suggests.
The Consumer Financial Protection Bureau in September put out a bulletin reminding employers they cannot require employees to receive wages on a payroll card, which may serve as a valuable tool for the payroll card industry, according to Beyda. “The CFPB’s bulletin provides guidance the industry should get behind,” she suggests. Industry members should also join the Network Branded Prepaid Card Association’s efforts to educate and publicize payroll cards’ benefits.