Payroll Card Regulations: Too Much of a Good Thing
By Cathy Beyda
Payroll cards are an important solution for both employers and employees, particularly in todays recovering economy. Electronic wage payment programs that utilize payroll cards allow employers to save a significant amount of money that can then be reinvested in the workforce.
Payroll cards also help to financially empower workers who do not have bank accounts and workers with limited access to traditional financial services (collectively referred to as underserved employees). In light of these benefits, interest in payroll cards continues to increase at a rapid pace. In fact, the Aite Group estimates that payroll card users will grow from 1.7 million in 2009 to 5.4 million in 2014.
At the same time, however, recent state legislative initiatives designed to formally recognize payroll cards have faced opposition from a number of consumer organizations. These groups express concerns that some employers may try to take advantage of their employees or that workers may unknowingly incur fees that eat away at their wages. However, these groups offer no concrete examples of this happening in the payroll card arena.
The consumer groups appear to recognize the benefits of payroll cards, but argue that payroll cards are largely unregulated and should not be considered a viable option without additional protections. Contrary to the groups suggestions, payroll cards are subject to state wage and hour laws and federal Regulation E, both of which contain significant consumer protections. The suggested revisions are not only unnecessary, but are so burdensome that many issuers and employers are likely to stop offering payroll cards altogether if they are adopted. In the end, the workers the consumer groups are seeking to protect are the ones that would suffer most.