The U.S. Consumer Financial Protection Bureau Moves To Protect Employees From Their Employers

David Ventker
As the costs of financial transactions mount, and as technology marches on, more and more employers have turned to the use of electronic payroll cards to pay their employees. The justification is that it significantly reduces the administrative cost of managing a payroll, especially in food services and retail operations with a large number of part-time and minimum wage employees.
As is true for all such technological advancements, however, abuses in the way the cards are processed are leading to a backlash. Really nothing more than a pre-paid debit card, payroll cards come with the same problems that are attached to debit cards. Employees find that if they want to check the balance on the card, there’s a fee. If they want to draw cash from the card, there’s a fee. If they don’t use the money on the card quickly enough, there’s a fee. If a card is lost, there’s a fee. As might be expected, the fees go to the banks and third party companies hired to issue and manage the cards. A cynic might conclude that an employee now has to pay for the right to collect his or her pay.
Like it or not, this type of abuse is what gives government regulators the excuse to step in, and the Consumer Financial Protection Bureau has done just that. In a bulletin issued on September 12, 2013, the CFPB announced that employers are prohibited from requiring employees to accept payment of wages by payroll card. Further, if an employee accepts this method of payment, the fees for used of the payroll card must be disclosed in advance, and, among other things, the employer must provide periodic reports to the employee with an accounting of all transactions on the payroll card.