Regulator Bars Employers From Requiring Pay on Debit Cards

[question everything]

Source: WSJ

WASHINGTON—Employers can't require that workers receive paychecks on debit cards, a federal consumer regulator said Thursday, in response to concerns that companies are saddling workers with cards that carry high fees... The cards, which can carry fees that critics say aren't clearly disclosed, have been criticized by consumer advocates, New York's attorney general and Democrats on Capitol Hill. Payroll cards are typically aimed at people who don't have a bank account and no access to a direct-deposit program.

The use of payroll cards attracted scrutiny this summer after a former worker at a Pennsylvania McDonald's Corp. restaurant filed a class-action lawsuit against the franchise's owners, alleging they didn't offer employees the chance to be paid by check. The CFPB said it has received reports of companies paying wages only through prepaid cards issued in conjunction with banks. The agency also said employees have complained of unexpected fees on such cards for services such as using an automated teller machine or checking the balance of a card.

In a warning letter to employers and the industry, the CFPB said the law "states clearly" that employers can't mandate that employees receive wages on a payroll card chosen by the employer. The employer must offer alternatives, such as direct deposit into a bank account or a paper check, the regulator said.



Read more: http://online.wsj.com/article/SB10001424127887323392204579071333262237764.html

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Companies mentioned, in addition to McDonald's, Urban Outfitters, Home Depot and Victoria's Secret. However, they do not offer the cards as the only option.

(If you cannot open by clicking, copy and paste title onto google)

[freshwest]

1. Good regulation protects worker rights and wealth. Good news.

[mahatmakanejeeves]

2. Tell this to the Commonwealth of Virginia,

which wants to issue Virginia income tax refunds on debit cards. I can't recall now who has the contract to operate that, but you can be sure they aren't losing money on it.

I got a check for my refund in the form of a check anyway. I guess they don't have the system up and running yet.

[obxhead]

15. I had mine done as a direct deposit.

I believe that will remain an option here in VA, but the paper checks are going away.

[BumRushDaShow]

3. K&R

And thanks to the administration for CFPB moving quickly on this sort of thing.

[truedelphi]

4. Food stamps that once were issued in a booklet of stamps,

Now come on a debit card.

If you call an 800 number to check the balance, you are charged $ .25, which is taken off the value of the Food Stamps! No one at Social Services tells you this - you only find out in the news.

[onyourleft]

8. Are they not...

...also going to do this with Social Security? I believe I read this somewhere. Taking effect in 2014 perhaps. I know one can also have a direct deposit but for those without a bank account it could cause a hardship.

[question everything]

10. Yes, Social Security checks are going to be directly deposited

however they will continue to be mailed to the several millions who cannot use it.

Another blow to the Postal Service

[SheilaT]

11. Social Security has required that all new recipients

get direct deposit as of March 1 of this year.

One problem with SS checks that I've been reading about for fifty years now, is that they can be too easily stolen, especially as the thieves know exactly when they'll arrive.

I have direct deposit for my paycheck, my small pension, and something else. It's quite nice, because the money is available immediately, rather than having to get to the bank, deposit the check, and wait for it to clear.

It saves an enormous amount of money compared to printing up mailing, and processing actual checks.

[Niceguy1]

22. better for the

Enviroment, too.

[liberalhistorian]

27. Except that the SSA doesn't realize

that there are still rural areas of the country where direct deposit will not work, as there are no banks within a reasonable driving distance. Here in South Dakota, there are nine Indian reservations and some of them have no banks and tribal members have no cars or money for gas if they did have cars. On Pine Ridge, which is very large and remote, there are no banks, many have no cars or, if they do have cars, they have no gas money. Hell, most people don't have money for food or heat, let alone gas for cars. It's not uncommon for people to walk thirty miles round trip to tribal headquarters to conduct business. Tribal leaders have been fighting with SSA to make exceptions for members under these circumstances, and there are other areas of the country where that's the case as well.

[SheilaT]

31. If there are no banks within driving distance, how does

the recipient deposit the check?

Perhaps the tribes should be thinking about setting up a credit union, which would then be a great boon to all. An actual bank, the ability to have an account and accept the direct deposit, and so on.

[liberalhistorian]

32. They cash it at tribal headquarters

or a local store, if there is one. And most tribes do not have the wherewithal to establish a credit union, not to mention the thicket of tribal sovereignty/tribal/federal laws that would need to be navigated. I don't think most people really realize the different world most tribes live in and the dire, stark, third-world poverty they exist in. Many tribal members would not even qualify for a bank account, especially the elders, considering the required documentation nowadays.

[SheilaT]

34. I realize that my ignorance is vast here, but

couldn't the tribes work around some of that stuff, like the documentation, within the context of a credit union? Couldn't the tribe simply go ahead and issue their own documentation?

Again, I realize I know practically nothing about any of the issues involved: tribal sovereignty, laws involving credit unions, and so on.

[llmart]

12. I think some SS recipients....

get debit cards already.

[Daniel537]

24. They don't actually receive debit cards

The have to obtain one themselves, which places an extra burden on the poor and disabled. They should have never eliminated paper checks, imo.

[liberalhistorian]

28. As I say above, that's especially

a problem for several of my state's Indian reservations, where extreme poverty is endemic, there are no banks and most don't have cars or money for gas for cars if they did have them. Many, especially elders, can't produce a lot of the bullshit documentation now required before banks will even look at them, let alone qualify for and open an account. It's a real problem here.

[Daniel537]

29. I can imagine.

I wish the govt. would practice what it preaches in this case. My mom gets SSI and every time she withdraws she has to leave some money on the card because the ATM only dispenses certain denominations, and since she rarely uses the card to purchase anything, the money basically remains idle. Horrible decision on Treasury's part, and its also a killer for USPS.

[ejpoeta]

14. I was not aware of this.

The EBT card is nice because I have had those paper food stamps and the glares are something else. But to charge someone who is poor enough to qualify for foodstamps service fees is ridiculous.

[truedelphi]

18. One of the big banks has

"Oversight" of the food stamp program here in California.

So fees are going to continue, unless we the Mosquito People bite our legislators in the butt often enough that the practice is ended. (Quote from Dalai Lama: "If you think you are too small to make a difference, try sleeping with a mosquito." )

[DallasNE]

5. My Guess Is That Employers Get Revenue Back

From these debit card issuers for the exclusive use of their card much like credit card users get cash back when they use their credit card. One action is voluntary while the other is forced and that is what it different.

[TeamPooka]

6. Because you getting paid should not be a profit center for your company. nt

[JBoy]

7. This scam is not unlike the old "company store" setup

Where workers were paid in company scrip that could only be redeemed at the company store. The company would mark up prices, effectively recouping some of their labor costs.

Although outlawed in the US, the Mexican subsidiary of Walmart was paying employees partially in Walmart vouchers up until 2008, when the Mexican supreme court put a stop to it.

Employers will not stop dreaming up new, creative ways to screw over their employees. It's in their DNA.

[obxhead]

16. All of their labor costs.

When all you get is funny money to be spent only in their shop they get 100% of the "money" back. Granted they had to pay for those products, but in the end they end up working for pennies on the dollar under that scheme.

[Politicub]

9. The CFPB is just getting started.

Awesome. No wonder the GOP hates it.

[Spitfire of ATJ]

13. Bank accounts for all is a fairly recent thing....

There was a time when factories would have the payroll arrive in cash in an armored car and they would dispense it through a teller window to the employees. You would pass them the time card and they would count out the cash.

In the movie "White Heat" the caper was to steal the payroll. That movie was in 1949, just four years after WWII.

[Hekate]

17. Good.

[gopiscrap]

19. Good, fucking business assholes

another reason why big business should be nationalized.

[happyslug]

20. The Pennsylvania case involved Pennsylvania law

And the law says wages can ONLY be paid in Cash or Check. Thus the class action suit will continue for these are NOT legal in Pennsylvania to pay wages.

Please note this is ONLY Pennsylvania law, other states may have similar laws.

[BeyondGeography]

21. The shit these guys try to pull...

Fucking absurd that this even had to be mediated.

[meow2u3]

23. OT: The article is behind a paywall

I can't read it.

[question everything]

26. Try copy and paste the title onto google

and then select the WSJ article. This is how I posted it..

[Daniel537]

25. Awesome.

Just wish they would still offer this choice to SS recipients.

[Safetykitten]

30. Many people, including me had a paper check that we cashed at a check cashing place.

The reasons:

No bank will cash a Home Depot check if you do not have an account.

Opening an account has always been an issue for people with very low incomes...credit reports.

Then about a year ago the directive came that there would be no paper checks. Only direct deposit with a pre-arranged bank...guess which one, which offered deals, or a card.

The bank instantly induced fees, and it was just easier paying the fee at the cash place then paying your bills with money orders.

[Throd]

33. Well there is some good news.