Read These Next
This post comes from Bill Hardekopf at partner site LowCards.com.
Employers can’t require their employees to receive wages on a payroll card, and the Consumer Financial Protection Bureau is stepping in to make that clear.
Businesses that offer payroll debit cards for their employees are supposed to provide them as a convenience. Recently, the CFPB has had issues with employers offering payroll cards as the only means of getting paid, which violates federal law.
According to the Mercator Advisory Group, nearly 5 million payroll cards were issued in 2011, and that number is expected to grow to more than 8 million by 2015.
“Employees must have options when it comes to how they receive their wages,” CFPB director Richard Cordray said in a statement. “Employers cannot mandate that their employees receive wages on a payroll card. And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections.”
Some employees who receive wages on employer-sponsored payroll cards have complained of unexpected fees that cut into their paychecks, such as ATM use, teller withdrawals, and checking the balance of a card.
Federal law provides consumer protections for payroll cards, including:
- Disclosure of fees. There must be clear disclosures in writing of any fees they may incur for electronic transfers of funds to or from the card.
- Access to account history. The card issuer must either provide periodic statements or generally make cardholders’ account balances and 60-day account histories available and these must include information about any fees imposed for fund transfers.
- Limited liability for unauthorized use. Payroll card holders’ liability for unauthorized use of their cards is limited.
- The cardholder has error resolution rights. If a cardholder reports a payroll card account error, the financial institution must respond.
Before you sign up to receive a payroll card, realize there may be a number of fees associated with your card. These include a monthly fee, a transaction fee, an ATM withdrawal fee, a balance inquiry fee and an activation fee.
More on LowCards.com:
- Beware of Fees on Payroll Cards
- Credit Card Customers Confused about Terms and Rewards
- The CFPB’s Accomplishments in its First 2 Years