The Consumer Financial Protection Bureau (CFPB) has issued a bulletin (CFPB Bulletin 2013-10) reminding employers about the law and accompanying regulation applicable to payroll card accounts. As discussed in the guidance, payroll card accounts are “established directly or indirectly through an employer, and to which transfers of the consumer’s salary, wages, or other employee compensation are made on a recurring basis.” Such accounts are subject to the Electronic Fund Transfer Act (EFTA) and its implementing Regulation E, which includes a number of rights and protections for employees whose wages are deposited onto payroll cards.
The guidance states that employers may “offer employees the choice of receiving their wages on a payroll card or receiving it by some other means.” However, employers cannot require employees to accept wage payments and other compensation via electronic transfer to a payroll card account unless the employee is allowed to choose the institution that will receive the direct deposit. “Permissible alternative wage payment method(s) are governed by state law, but may include direct deposit to an account of the employee’s choosing, a paper check, cash, or other evidence of indebtedness.” Employers are cautioned that most state laws “contain additional restrictions on the manner in which employers may make wages available to their employees, sometimes specifically addressing payment of wages via payroll card, or calling for particular alternatives to payroll cards.”
The CFPB guidance also notes that employers must disclose any fees involved with payroll card account use, and provide employees with access to their account histories.
Finally, the bulletin states that the CFPB has the power to investigate and enforce noncompliance with the EFTA and Regulation E against employers as well as financial institutions.