Over the past several years, there has been a growing trend towards paying American workers with payroll cards. Payroll cards are pre-paid cards issued by employers to employees that can be used at an A.T.M. to withdraw wages. In 2012, approximately 4.5 million American workers received their wages on payroll cards, and the numbers continue to grow. Using payroll cards does have certain benefits because it gives workers without traditional bank accounts a way to withdraw their wages; however, the fee structure associated with many pre-paid cards hurt American workers in a big way.
Generally, the use of payroll cards involves a number of fees that quickly add up to take a significant chunk of workers’ wages. For many hourly workers, these fees eat up valuable wages that leave them making less than the minimum wage. When every dollar counts, these fees can leave workers light in the wallet when paying for necessities such as groceries, transportation, or rent. Payroll card fees typically include a fee for withdrawing cash, a fee for receiving a paper statement, and a fee for losing a card. In one example, a McDonalds employee in Wisconsin was spending $40 to $50 a month on fees associated with his payroll card. In another example, a Taco Bell employee in St. Louis would withdraw all of her wages at the start of the month and keep them in a shoebox in her closet in order to avoid high fees associated with withdrawing wages.
When it comes to the use of payroll cards, American workers do have certain protections. Employees who have their wages transferred onto payroll cards are entitle to protection under the Electronic Fund Transfer Act. The Electronic Fund Transfer Act offers the following protections:
- Fee Disclosure: payroll card users are entitled to receive upfront disclosures of any fees that will be associated with use of the payroll card. This allows workers to know exactly how much they will have to pay in fees before using their payroll cards.
- Access to Account History: Payroll card issuers must provide either a periodic statement, or make available to the consumer the following: (1) the consumer’s account balance by telephone; (2) an electronic account, such as through a website, of the consumer’s transaction history covering at least the past 60 days; and (3) upon the consumer’s oral or written request, a written account of the consumer’s transaction history covering at least the past 60 days.
- Limited Liability for Unauthorized Transfers: If there is an unauthorized withdrawal of funds from a payroll account, the consumer must notify the financial institution within two days in order to receive limited liability protection. The consumer will not be liable for the lesser of $50 or the amount of the unauthorized transfer.
- Error Resolution Rights: Financial institutions must respond to complaints of account errors within 120 days.
- Prohibition Against Mandating Payroll Cards: The strongest protection provided to workers is that employers cannot force their employees to receive wages on a payroll card. Employers must give employees the choice of having wages deposited at a particular financial institution or receiving wages by other means, such as by cash or check
- Federal Enforcement: If an employer violates portions of the Electronic Fund Transfer Act the Consumer Financial Protection Bureau has authority to take action against that employer.
While the use of payroll cards will likely continue to rise, it is important that American workers know their rights. If workers find that a significant amount of their paycheck is going to payroll card fees they should consider telling their employer to pay their wages using other means. No worker should be forced to pay high fees in order to retrieve their hard-earned money.