This week, the New York Department of Labor released new rules that prohibit many of the fees associated with payroll cards.
Payroll cards look and work much like debit cards, but are not linked to a personal bank account. Some workers report that usage fees for these cards eat into much-needed funds. Payroll card fees can be particularly harmful to lower wage workers.
New York’s payroll card rules have many of the provisions that we believe keep the convenience and safety of electronic pay without the downsides that may accompany the use of payroll cards. For example, the new rules
- require that users have unlimited free cash withdrawals at a reasonably convenient ATM;
- prohibit fees for customer service, account enrollment, account maintenance, overdraft, inactivity, balance inquiries and account closing; and
- bar employers from passing on the costs of the payroll program to workers, and prohibit employers from receiving compensation for paying workers via payroll card.
The New York rules fill an important gap left by federal law. While payroll cards have federal protections that limit the cardholder’s liability errors, federal law does not limit fees associated with payroll cards. The costs to consumers can really add up. One payroll program cost users an average of $20 a month, most of which were fees imposed on users for accessing their own money. (For more on the concerns around payroll cards, please see our article from 2014.)
We’ve long advocated for strong state level protections for payroll card users to close the gap between federal law and employer practice, and applaud New York for moving forward to ensure that employees can access their full pay. We will continue to work for strong protections for payroll card users, and to make sure that every way is safe to pay.
Do you have a payroll card story? Please share it in the comments.