N.Y. AG’s Problematic Payroll Card Act Gets Sponsors from Both Sides of Aisle (April 8, 2015)
Both political parties again are backing problematic payroll card legislation from New York Attorney General Eric T. Schneiderman that could squeeze margins and force some providers to pull programs from the state.
“The bill as written will ensure that few, if any, payroll card programs would be viable in New York,” says Cathy S. Beyda, of counsel, Paul Hastings and a payroll card expert. “The unfortunate result is that unbanked workers would remain captives of check cashing stores whose fees far surpass the cost of any payroll card, without offering any of the benefits.”
The payroll card bill, which was first proposed last year, is sponsored by Assembly Majority Leader Joseph Morelle (D-136th) and State Sen. Patrick Gallivan (R-59th). The Assembly and Senate versions of the bill were referred to the Labor Committees in each house earlier this week.
“While payroll cards can be helpful for employees without bank accounts, too often workers see their hard-earned wages chipped away by fees,” said Schneiderman in a news release. “The Payroll Card Act will ensure that workers have free and clear access to their wages, and provide clarity to employers about how to offer payroll cards in compliance with the law.”
The bill will enable employees to elect whether to be paid through a payroll card, direct deposit or to receive a paper check; mandate that employees receive clear and appropriate notice of payroll card program terms and conditions, including potential fees and how to avoid them; prohibit employers from using payroll card programs that charge certain types of fees, and require employers to use card programs with at least one network of ATMs where employees can obtain access to their wages without paying a fee; among other stipulations. The bill also requires free and unlimited balance inquiries, free customer service with a live agent and one free replacement payroll card per year, among other services.
While the goals of Schneiderman’s legislation sound promising, the bill goes far beyond advancing full and free access to wages and disclosure of terms and conditions, according to Beyda. The bill establishes a unique set of rules for payroll card programs in New York that would go far beyond existing and proposed Regulation E protections and would exceed the requirements in any other state, she adds.
“Financial institutions also would be required to provide a number of free banking services, making an already low-margin product unsustainable,” Beyda tells Paybefore. Another issue that concerns her is that strict penalty provisions could discourage employers from offering payroll cards for fear that they’ll be held liable if the card issuer violates any of a number of federal banking law provisions, even if the violation is minor and inadvertent.
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