The blow back over payroll cards just became heftier. An influential group of U.S. Senators wants federal investigations into fees and practices associated with these reloadable prepaid debit cards that have become a popular way for employers to cut payroll costs.
In a letter addressed to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), the Senators asked the consumer watchdog agency to render an opinion on whether employers who require employees to accept pay via a prepaid debit card are in violation of Regulation E.
The blow back over payroll cards just became heftier. An influential group of U.S. Senators wants federal investigations into fees and practices associated with these reloadable prepaid debit cards that have become a popular way for employers to cut payroll costs.
In a letter addressed to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), the Senators asked the consumer watchdog agency to render an opinion on whether employers who require employees to accept pay via a prepaid debit card are in violation of Regulation E (a set of federal protections for consumers using electronic payment methods, like debit cards). They also asked the Department of Labor to look into what kind of disclosures companies should and are making to employees whose paychecks are automatically deposited to payroll cards.
Payroll cards first emerged in the 1980s as an alternative for companies that wanted to convert payroll to Direct Deposit but couldn't because some employees didn't have bank accounts. In recent years the cards have become a favorite among large corporations with a lot of hourly employees (think McDonalds, or Walmart). That's because Direct Deposit is designed for payments that are regular and relatively constant, and hourly employees' pay typically varies from check to check.
But the fees that typically accompany prepaid debit cards - charges for ATM withdrawals, balance inquiries and POS charges - have become a sore point with employees. And recent media reports suggest their complaints are being taken seriously. (See previous post, below.) In their letter to Cordray the lawmakers said it was those reports that prompted their concerns.
"Workers should be able to receive their pay without fear of losing money to debit card fees," said Senator Bob Casey (D-PA). "No workers - and especially lower income workers - should have to worry about hidden fees taking a bite out of their hard-earned paychecks," added Sen. Robert Menendez (D-NJ). Menendez recently introduced legislation - the Prepaid Card Consumer Protection Act - intended to limit the fees on prepaid cards and to require full disclosure of allowable fees at the time of purchase. Senator Dick Durbin, the Illinois Democrat whose name has become synonymous in banking circles with debit card fee caps, also signed the letter, as did Elizabeth Warren, the Massachusetts Democrat who originally set up the CFPB, which was created by the Dodd-Frank Financial Reform Act.
There's no word yet on how CFPB or the Labor Department will respond. However, CFPB has expressed concerns about prepaid debit card pricing and disclosures. In March the bureau issued an "Advance Notice of Proposed Rulemaking" seeking input into "first-ever" federal regulations addressing prepaid debit cards. The proposal addresses pricing transparency, disclosures and related consumer protections.
In a letter addressed to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), the Senators asked the consumer watchdog agency to render an opinion on whether employers who require employees to accept pay via a prepaid debit card are in violation of Regulation E.
The blow back over payroll cards just became heftier. An influential group of U.S. Senators wants federal investigations into fees and practices associated with these reloadable prepaid debit cards that have become a popular way for employers to cut payroll costs.
In a letter addressed to Richard Cordray, Director of the Consumer Financial Protection Bureau (CFPB), the Senators asked the consumer watchdog agency to render an opinion on whether employers who require employees to accept pay via a prepaid debit card are in violation of Regulation E (a set of federal protections for consumers using electronic payment methods, like debit cards). They also asked the Department of Labor to look into what kind of disclosures companies should and are making to employees whose paychecks are automatically deposited to payroll cards.
Payroll cards first emerged in the 1980s as an alternative for companies that wanted to convert payroll to Direct Deposit but couldn't because some employees didn't have bank accounts. In recent years the cards have become a favorite among large corporations with a lot of hourly employees (think McDonalds, or Walmart). That's because Direct Deposit is designed for payments that are regular and relatively constant, and hourly employees' pay typically varies from check to check.
But the fees that typically accompany prepaid debit cards - charges for ATM withdrawals, balance inquiries and POS charges - have become a sore point with employees. And recent media reports suggest their complaints are being taken seriously. (See previous post, below.) In their letter to Cordray the lawmakers said it was those reports that prompted their concerns.
"Workers should be able to receive their pay without fear of losing money to debit card fees," said Senator Bob Casey (D-PA). "No workers - and especially lower income workers - should have to worry about hidden fees taking a bite out of their hard-earned paychecks," added Sen. Robert Menendez (D-NJ). Menendez recently introduced legislation - the Prepaid Card Consumer Protection Act - intended to limit the fees on prepaid cards and to require full disclosure of allowable fees at the time of purchase. Senator Dick Durbin, the Illinois Democrat whose name has become synonymous in banking circles with debit card fee caps, also signed the letter, as did Elizabeth Warren, the Massachusetts Democrat who originally set up the CFPB, which was created by the Dodd-Frank Financial Reform Act.
There's no word yet on how CFPB or the Labor Department will respond. However, CFPB has expressed concerns about prepaid debit card pricing and disclosures. In March the bureau issued an "Advance Notice of Proposed Rulemaking" seeking input into "first-ever" federal regulations addressing prepaid debit cards. The proposal addresses pricing transparency, disclosures and related consumer protections.