Will N.Y. Bill Run Payroll Cards Out of Town? (June 16, 2014)
New York State lawmakers, along with Attorney General Eric Schneiderman, came out with guns blazing last week—their target: payroll cards. Assembly Majority Leader Joseph D. Morelle (D-136th) and Sen. Patrick Gallivan (R-59th) announced their support of the Payroll Card Act, penned by Schneiderman, which prohibits certain fees and requires other free services industry experts say could result in payroll card providers leaving the state if they determine the programs are unsustainable.
The legislation, introduced to the General Assembly June 10, would “increase protections for workers, clarify ambiguities in the law and ensure that payroll cards offer a convenient and beneficial method for workers to access their pay,” according to an announcement from the attorney general’s office.
“While payroll cards can be helpful for employees without bank accounts, programs often impose fees that chip away at people’s hard-earned wages,” said Schneiderman. “The Payroll Card Act will ensure that workers have free and clear access to their wages, while providing clarity to employers about how to offer payroll cards in compliance with the law.”
If the legislation is passed, however, it could have consequences far different than the attorney general’s intentions, according to Brad Fauss, NBPCA vice chairman, and executive vice president and general counsel at Brightwell Payments Inc.
“While I believe his motives are sincere, N.Y. Attorney General Schneiderman’s proposed Payroll Card Act likely will remove payroll cards from the New York market,” Fauss tells Paybefore. “His proposed list of fees that will be prohibited, as well as services that will be required to be provided for free, would make payroll card programs in New York uneconomical.”
In addition to typical requirements to provide free access to wages at least once each pay period, the bill also prohibits fees for inactivity, monthly maintenance, account initiation, customer service and overdraft or negative balance, among others. The legislation also requires that the card issuer offers free, unlimited withdrawals and balance inquiries within its own ATM network, and proposes a limited number of free out-of-network ATM transactions.
If payroll card programs become unsustainable in the state, underserved employees could be left with paper checks as their only option, according to Fauss. “This option comes with its own costs, such as check-cashing fees and expenses associated with other needed services like walk-up bill pay or money orders to pay monthly bills. In fact, studies have shown that fees for using payroll cards are generally lower than the fees incurred by underserved workers who receive a paper paycheck.”
The legislation is based on recommendations made in a report by the Attorney General’s Labor Bureau released last week, following complaints from employees and “other information indicating that certain payroll card programs were potentially in violation of state labor law, or did not provide adequate disclosures regarding the terms and conditions of the card,” according to the attorney general’s office.
Paybefore CEO Marilyn Bochicchio responded to a New York Times June 13 article on the New York bill, but her comments were not posted in the publication’s online comment section. Click here for her comments on the challenges of being unbanked.
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