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Payroll Card Bill Would Slam Workers
By JOHN SEILER A recent trend in banking is what’s called “stored-value cards.” When used for workers’ pay, they’re also called “payroll cards.” They act much like debit cards. And they’re similar to prepaid gift cards or a Starbucks value card. Each card accesses a bank account that holds a certain value, which then can be withdrawn for purchases or cash. The cards reduce banking fees paid by issuers. And the cards are convenient for those who don’t have bank accounts which they can use for direct deposits, or for cashing checks. SB 931 would add new regulations to the payroll cards. It’s by state Sen. Noreen Evans, D-Santa Rosa. The bill specifies that the payroll cards only can be issued with the following conditions: A. The employee is presented with the option of receiving his or her wages by direct deposit, the option of receiving payment by paper check, and the option of receiving payment by payroll card before selecting one of the options; B. The employer obtains the employee’s written consent to receive wages by payroll card and provides specified information (including a payroll card fee schedule); C. The employer does not make participation in the payroll card program a condition of hire or continued employment; D. The employer selects an issuer that offers employees a process for disputing payroll card account fees, as specified; E. The employer honors a written request by the employee to change the method of receiving wages within two pay periods from the time of the request…. Effective BanAlthough payroll cards aren’t outright banned, the new regulations are so onerous that employers likely will just forget it and use the time-tested system of issuing paper paychecks. If the workers don’t have bank accounts on which to cash the checks, then they will have to use the storefront check-cashing outfits that charge high fees, thus effectively reducing the worker’s take-home pay. No wonder SB 931 is being opposed by major business groups, including the California Chamber of Commerce, the California Bankers Association and the California Retailers Association. It’s supported by California Teamsters Public Affairs Council, the California School Employees Association, the Utility Workers of America and other labor groups even though the bill would reduce workers’ effective wages. The legislative analysis explains the reasoning behind the bill: “The bill’s sponsor, the California Labor Federation, states that current California law is silent on the use of payroll cards. Therefore, it is unclear what protections, if any, exist for employees receiving their wages by payroll card; what standards, if any, exist for the use of a payroll card program for an employer; or, if the payroll card method is a legal method for paying employee wages in California.” Arguments AgainstAccording to an analysis the Chamber sent me: * This bill is a de-facto ban on payroll cards because it will make it cost prohibitive for financial institutions or employers to offer these programs in California. The list of prohibited fees included in this bill by its proponents all but ensures that payroll cards will no longer be a viable method of payment that employees, in both the public and private sectors, enjoy today. * Payroll cards already are a lawful method of wage payment in California. Labor Code section 213, as interpreted by the DLSE, allows for the use of payroll cards as a valid method of payment so long as employees are provided with at least one means of accessing their full wages each pay period in cash. The state Labor Commissioner has confirmed this in an opinion letter. * It will establish a de-facto ban on payroll cards and deny employees the benefits of innovative electronic payments. By establishing unworkable standards and making it cost prohibitive to offer payroll cards, SB 931 will force businesses to revert to paying their unbanked employees using paychecks only. The hardest hit will be the one-in-five low-income Californians who do not have a checking account. * The bill punishes employees by denying them access to the financial mainstream. Payroll cards empower unbanked employees by providing them with an efficient method to pay bills electronically, make reservations, make purchases online, etc. — all things they cannot do when reliant on cash. By making payroll cards unavailable, SB 931 will force unbanked employees to rely on expensive check cashing services and to incur additional costs when purchasing money orders to pay their bills. A recent study shows that employees using check cashing establishments and purchasing money orders pay over three times more in fees than current payroll cardholders pay on an annual basis1. Studies2 have repeatedly shown that payroll cards are one of the least expensive ways for employees to receive their wages. This study confirms that SB 931 is a solution in search of a problem. Unfortunately, the current California Legislature is expert at creating problems instead of solving them. SB 931 passed the Assembly on Sept. 8, on partisan lines. Supposedly pro-Labor Democrats backed an anti-worker bill. It awaits action today in the Senate. The Legislature goes into recess at midnight tonight. SB 931 is another argument in favor of a Texas-style part-time Legislature that meets for six months every two years. By now, the Legislature would have been gone for months and couldn’t engage in any more mischief until 2013.
Tags: Noreen Evans, payroll card, SB 931, stored-value card Comments(6) |
June 19, 2013
I’m lost
The regulations seem reasonable.
Would you like to be given your paycheck on a card if you already had a bank account? I assume you would want direct deposit.
I would think that any serious payroll processor would offer a range of options. Payroll cards seem handy for those without bank accounts but they are not for everyone.
I’m with NormD on this. I would go for direct deposit if I had an bank account. If I don’t and opted for the card here’s a question:
Can I go into the financial institution issuing the payroll card (I am assuming that it is generated by a Bank or financial affiliate) and simply cash out the card? I’m sure that there would be a convenience fee involved in the cost of such a banking enterprise (pre-service bank costs, manufacture, processing and distribution of the physical card, post-bank servicing costs, funding marketing programs, the administration of these marketing programs, support services towards the performance of the cards, etc.) for this service (which will most likely be incrementally paid by the employee), but this certainly must be less than the alternative predatory “payday loan” fees that would be charged.
In the instance of payroll cards is the regulation is trying to address fair management and/or protection to the employee receiving payment in this manner?
An employee can ALWAYS cash the payroll check at the bank it is drafted on without fees-it is illegal in CA to charge a fee for cashing a payroll check.
Having the employee go into a specific issuing bank to cash a payroll check is a tall order, especially local bank issued checks for employees located in multiple states.
“No wonder SB 931 is being opposed by major business groups, including the California Chamber of Commerce, the California Bankers Association and the California Retailers Association.”
These are yet another way for banks to rip off ordinary people. My son got one of these for his first paycheck. Hopefully direct deposit will kick in for the next one. You KNOW this is NOT for the benefit of the EMPLOYEE. Why is it SO onerous to issue a paycheck? Between fees and money left on the card at the end, I’m sure someone is making a pretty penny on this. Guess who: see above quote.
The California Chamber of Commerce is nothing but a front for greedy, irresponsible big businesses. I was a member (small business owner) for a short time until I figured that out.
The paycard is just one solution an employer can offer. Statute still requires that a physical check be cut if requested. Also there is a requirement that the funds be available without a fee. The best part of a pay card is it gives employees without a credit card a method to make purchases that cannot be done with a check and to use the card to reserve hotel rooms, rental cars and other items that cannot be done withe a check. Also, several of the pay card issuers like ADP will issue multiple cards to the family member of the employee. A child at college could get an allowance directly on a pay card when the parent is paid.