Prepaid Debit Card Reviews, Complaints, Etc

Tag: New York attorney general

  • Employers Cannot Mandate Prepaid Cards For Wages

    Employers Cannot Mandate Prepaid Cards For Wages

    Responding to complaints, the Consumer Financial Protection Bureau (CFPB) issued a reminder to employees that they cannot force workers to accept pay on prepaid debit cards.

    by Shane Tripcony

    Over the summer the practice of using prepaid debit cards to pay employee salaries garnered a lot of attention, much of it negative. News outlets, The New York Times, Time Magazine and Businessweek, report that employees of large companies such as McDonald’s and Time Warner Cable complained that they were being forced to accept wages deposited onto a prepaid debit card. They were not offered the option of a paper check or direct deposit.

    Employees, many of them earning minimum wage, argued that payment via prepaid debit card meant they were losing a chunk of their salary to a range of the standard fees associated with prepaid debit cards. In response to the outcry, New York Attorney General, Eric Schneiderman, launched an investigation into rules around the use of prepaid debit cards to pay salaries that were being broken. As part of that effort, Schneiderman requested information from 42 companies doing business in New York – including Sears, Home Depot and Walgreen’s – about their use of prepaid cards to meet payroll. “No worker should have to accept a form of payment that reduces take-home pay and leads to hundreds of dollars in fees,” Schneiderman told NBC News.

    Now Schneiderman is receiving support from the federal government. Last month the Consumer Financial Protection Bureau (CFPB) issued a bulletin reminding employers that they cannot require employees to receive wages on a prepaid debit card. “Today’s release warns employers that they cannot mandate that their employees receive wages on a payroll card,” CFPB Director Rich Cordray said in a statement. “And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections.

    In its statement, the CFPB declared that the use of prepaid debit cards to pay wages falls under its jurisdiction under the Electronic Fund Transfer Act and Regulation E. These provisions outline a number of employee protections specific to prepaid debit cards. Among them are written disclosures of all fees related to the cards, access to account history and limited liability in the case of unauthorized use of a card.

    In making its declaration concerning employers’ use of prepaid debit cards, the CFPB announced its intention to aggressively enforce the rules. “The Bureau intends to use its enforcement authority to stop violations before they grow into systemic problems, maximize remediation to consumers, and deter future violations,” reads a statement from the CFPB.

     

  • Paying to Get Paid: Employee Costs with Employer Prepaid Card Programs

    Paying to Get Paid: Employee Costs with Employer Prepaid Card Programs

    One of the most common messages you’ll hear about prepaid debit cards these days – including here on this very site – is that they have changed significantly in recent times. In the past, prepaid debit cards were considered suitable only for millions of so-called “unbanked” Americans, those whose credit wasn’t good enough to qualify them for a traditional checking account or credit card. For a variety of reasons, however, the demand for prepaid debit cards has shifted decidedly toward mainstream consumers.

    This has been a good thing both for existing prepaid debit card customers and newcomers because increased demand has prompted large financial players like Wells Fargo, JP Morgan Chase and American Express to jump into the market. Long derided for excessive fees targeted at the most financially vulnerable Americans, prepaid debit cards as a category have certainly improved thanks to increased competition – fees are generally lower and more competitive, and some card issuers even offer consumer protection in the event a card is lost or stolen. Taken together, these developments have spawned some favorable press coverage.

    But by no means is all of the attention glowing. In late June and early July of 2013, thanks largely to a lengthy story in The New York Times, the practice of paying worker wages via a prepaid debit card has come under increased scrutiny. According to the report in the Times – and subsequent coverage in and Businessweek – large employers including Wal-Mart Stores, McDonald’s and Time Warner Cable are eschewing traditional paper paychecks and direct deposit in favor of paying wages on prepaid debit cards. The article in the Times, written by reporters Jessica Silver-Greenberg and Stephanie Clifford, quoted numerous workers, some earning minimum wage, who complained that excessive fees were eating into their already low wages. Additionally, workers interviewed said that they were not given the option to receive either a paper check or direct deposit.

    The reason some large employers have embraced prepaid debit cards as a way to pay workers is simple. It saves them money. Time Magazine, citing a calculation done on Visa’s payroll card , reported that a company with 250 employees getting paid every other week could save $10,600 annually in payroll processing costs by using prepaid cards.

    This spate of attention has already spawned an investigation. In early July New York Attorney General Eric Schneiderman initiated an inquiry into 20 companies that may be routinely using prepaid debit cards to pay their employees; a practice that has to receive written employee consent. Businessweek quoted a letter Schneiderman’s office sent to the companies. “We are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees’ take-home pay.”

Prepaid Debit Card Reviews, Complaints, Etc