The federal Consumer Financial Protection Bureau (CFPB) issued a bulletin on September 12, 2013 cautioning employers not to force employees to receive their wages through “payroll cards” and reiterating employees’ rights with regard to payroll card accounts.
The bulletin described payroll card accounts as “accounts that 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 Regulation E (which implements the EFTA), thus providing employees with “the protections of the EFTA generally, and Regulation E’s provisions applicable to payroll cards specifically.”
The CFPB bulletin states that Regulation E prohibits employers from mandating that employees receive wages on a payroll card. An employer may, however, offer employees the choice of receiving their wages on a payroll card or receiving wages by some other means. These alternative wage methods 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. In the event an employee elects to receive his or her wages by a payroll card account, the CFPB reiterated certain rights that Regulation E provides to employees.