N.Y. DOL Issues Strongly Opposed Final Rule on Payroll Cards
A New York Department of Labor (DOL) rule that has been bitterly opposed by a major prepaid card association is being implemented anyway. The N.Y. DOL has issued its final rule regulating methods and payment of wages, including the use of payroll cards, in the state and includes no substantive changes from its second revised proposal in June. The move comes despite the financial service industry’s repeated attempts to argue that the rule would make it difficult for payroll card providers to continue to operate in the state and deny workers, especially the un/underbanked, a choice in how they are paid. The final rule, which takes effect March 7, 2017, can be found on page 8 of the Sept. 8 edition of the New York State Register.
Network Branded Prepaid Card Association (NBPCA) last July filed its third comment letter with the N.Y. DOL outlining several concerns with the rule. Most of its concerns were not addressed in the final rule. According to the NBPCA, the rule remains inconsistent with Regulation E and will cause providers to incur substantial expense to maintain separate compliance programs for New York workers; myriad fee restrictions likely will make it uneconomical for providers to offer payroll cards; and employers don’t have control over ATM locations and therefore a requirement to provide employees with “local access” to one or more ATMs in “reasonable proximity” to the employee’s place of work or residence is impractical.
“Payroll cards are a crucial tool for millions of unbanked and underbanked Americans, including nearly 30 percent of New York households, who opt for a more affordable and convenient way to access their wages,” Brad Fauss, NBPCA president and CEO, said in a prepared statement. “By placing onerous limits on this important financial tool, the Department of Labor is harming the very consumers it is seeking to protect. It is incredibly unfortunate that despite three proposals and numerous comments submitted by the financial services industry, the department still missed the mark and, as a result, New Yorkers are now facing more barriers to financial inclusion and will be forced to rely on riskier, more expensive products to access their own money.”
One bright spot is that the commentary to the final rule no longer requires securing new consents from employees who are currently being paid by direct deposit or payroll card. The commentary says that whatever consents were previously given will remain valid as long as new notices are provided to employees before the effective date of the final rule. It also says that employees must be told about their right to withdraw consent to payment by direct deposit or payroll card. Fauss says this is a positive change because securing new consents from the millions of existing New York direct deposit/payroll card employees would have been nearly impossible.
NBPCA will be discussing the final rule with its members to determine “next steps prior to implementation of this short-sighted rule,” Fauss tells Paybefore. “You may see some large payroll card providers pull out of the New York market,” he adds.