Regulators, Legislators Focus on Payroll Cards

Employers must comply with a patchwork of state laws.

Payroll cards, onto which companies load workers’ wages, are growing by leaps and bounds. Their popularity is being driven by the savings the cards afford employers and the growing number of employees without bank accounts. But the cards have also become a target for state legislators and regulators over the last year.

“We’re moving into a climate of tighter regulation of payroll cards,” said Patricia Smith, a partner at the law firm Ballard Spahr.

Last September, the Consumer Financial Protection Bureau issued a bulletin reminding employers that under federal law, they cannot mandate that employees receive their wages on a payroll card. They have to offer another payment method as well, with the alternative payment type governed by state law.

“The number-one thing employers should do to avoid any regulatory risk is be sure they don’t force their employees onto a paycard,” Dunn said. “Employees have to have a choice—they have to have an alternative to a paycard.

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