On September 12, 2013, the Consumer Financial Protection Bureau (CFPB) issued a bulletin warning employers that they cannot require their employees to receive wages on payroll cards. The CFPB's bulletin was issued amid the growing unrest among workers about the high and unexpected fees often associated with payroll cards. Critics say that the fees may be so high that employees end up making less than the minimum wage.
In recent years, there has been an increasing amount of employers (especially in the retail and food-service industries) who have adopted this method of payment to reduce the costs associated with distributing cash or checks. Rather than receiving their wages through cash or check, employees receive them on a bank card that can be spent like a credit/debit card or used to withdraw cash at a bank or ATM.
Over the past few months, this payment method has been widely reported in the media. In June, a woman filed a class-action lawsuit against the operators of 16 McDonald's restaurants in northeastern Pennsylvania challenging their use of payroll cards and protesting the fees and costs incurred to access the wages. (Natalie Gunshannon v. Albert/Carol Mueller T-A McDonalds, Case No. 20130710 in the Court of Common Pleas of the State of Pennsylvania, County of Luzerne). Moreover, in July, the New York Attorney General's office sent letters to several companies requesting documents related to their payroll card programs to ensure compliance with the consumer protection laws.
Employers who use payroll cards should take heed of the CFPB's bulletin. The bulletin explains the protections that must be afforded to employees and cautions employers that state law may impose additional restrictions on how employers make wages available to their employees (e.g. mandating alternatives to payroll cards or requiring affirmative consent).
The CFPB has authority to enforce the law against anyone who violates it, including employers and the banks that issue the payroll cards. Therefore, employers who use payroll cards should contact their counsel to ensure their program complies with applicable state and federal laws.