The Use of Payroll Cards is Raising Legal Issues

If the New York Attorney General investigates payroll cards, does the rest of the country hear the noise?

As if employers did not have anything else to worry about, New York Attorney General Eric Schneiderman has begun an investigation into the practice of employers paying their employees through prepaid payroll cards (http://www.ballardspahr.com/alertspublications/legalalerts/2013-07-11-ny-attorney-general-investigates-use-of-payroll-cards.aspx).

What exactly is a prepaid payroll card?

Prepaid payroll cards are like a bank debit card that is given to an employee and when payroll is dispersed money is automatically deposited to the card and the employee can use it just like any other debit card to pay their bills. In most cases this is a great service that simplifies life for everybody concerned. However, the cards are also open to a great deal of abuse in the forms of excessive fees by the firms issuing the cards.

A total of 16 U.S. senators have sent notice to federal regulatory bodies using the term “shocking” in regard to the amount of money taken from some employees’ payroll through these fees.  While I do not want to diminish the egregious nature of the violation if the card company is taking excessive fees, I would also caution you not to assume the entire industry does that.

So you might ask: What should you look for if you are using prepaid payroll cards?  The Senators in their letter indicated, “mandating the use of a particular payroll card, with no available alternative, seems clearly to violate federal law.” I would also add that if you are not offering alternatives to payroll cards and extensive education to point out the availability of the alternatives, you might well be in trouble.

 

As with all employer legislation it is a good idea to check your practices (especially as they relate to payroll) and make sure they are clearly outlined in whatever format you notify employees.

For more information contact Bill Weaver, Focus Benefits Group, 602-381-9900!

 

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