N.Y. DOL’s Reissue of Payroll Card Proposed Rule Jeopardizes Cards in the State (Oct. 29, 2015)

Written by FinTech Futures
29th October 2015

The New York State Department of Labor this week reissued its proposed rule on payroll cards (see page 7 of PDF), which is similar to the one issued in May. Although some of the DOL’s changes are favorable to the industry, lingering provisions, particularly those around banned fees, will prove problematic to payroll card business models.

Banned fees include those for:

•   Application, initiation, loading, participation or other action necessary to receive wages or to hold the payroll debit card
•   POS transactions
•   Overdraft, shortage or low-balance status
•   Account inactivity
•   Maintenance
•   Telephone or online customer service
•   Accessing balance or other account information online, by interactive voice response, through any other automated system offered in conjunction with the payroll debit card, or at any ATM in network made available to the employee
•   Providing the employee with written statements, transaction histories or the issuer’s policies
•   Replacing the payroll debit card at reasonable intervals
•   Closing an account or issuing payment of the remaining balance by check or other means
•   Declined transactions at an ATM that doesn’t provide free balance inquiries

Fees that aren’t explicitly identified by type and dollar amount in the contract between the employer and the issuer or in the terms and conditions of the payroll debit card provided to the employee also are prohibited.

Another change affects consent requirements. In the original proposal, employers had to wait seven business days after providing required disclosures to employees before seeking an employee’s consent to receive wages by payroll card. In the newly proposed rule, an employer can obtain an employee’s immediate consent after delivering required disclosures. However, the employer must wait seven business days after receiving consent before making a wage payment through a payroll card. At first glance, the change might seem like minutiae, but the change still doesn’t fix the costly problem of employers having to cut paper checks for employees when payday falls within that seven-business-day period.

“Although the N.Y. DOL’s new proposal includes some improvements from the first proposal, the NBPCA remains concerned that the new rule will not ultimately benefit payroll card users, and could result in payroll card providers leaving the market due to the significant fee prohibitions and the seven-business-day waiting period before an employer can make any payroll card loads,” says Brad Fauss, president and CEO of the NBPCA.
A beneficial change in the revised rule is that it would take effect six months after adoption of a final rule. Previously, the rule would have become effective immediately after the final rule’s publication.

Because of the 30-day comment period and the upcoming Thanksgiving holiday, the NBPCA will be moving quickly to develop its comment letter, according to the association. Nov. 27, 2015, is the deadline to submit comments, which may be submitted to: Michael Paglialonga, Department of Labor, Building 12, State Office Campus, Room 509, Albany, NY 12240, (518) 457-4380, email: [email protected].