U.S. Sen. Mark R. Warner (D-Va.) applauded the release of new Consumer Financial Protection Bureau (CFPB) guidance on “payroll cards,” which some employers use to pay their employees instead of payroll checks or direct deposit. In July, Sen. Warner joined 15 of his colleagues in calling for an investigation into the fees and practices associated with the pre-paid cards. These cards often come with fees for ATM usage, balance inquiries, overdrafts, and inactivity that can create financial risk to employees. The payroll cards appeared to violate existing consumer regulations.
“Today’s decision from the CFPB represents a victory that will help protect millions of hard-working Americans from deceitful payroll card practices,” Sen. Warner said. “This CFPB guidance makes it clear that employers may not provide payroll cards unless they clearly disclose all fees in advance to their employees and allow them to opt out. I will continue to work with CFPB to monitor this issue and ensure that the guidance is followed to help protect Virginia workers.”
This past June, The New York Times reported that the fees attached to payroll cards can be so exorbitant that some workers end up making less than the minimum wage. In addition, there are serious concerns that workers are being pressured or coerced by their employers into accepting their salaries through pre-paid cards. In fact, the Times reported that some employers receive commissions for each employee they sign-up to a particular pre-paid card, which creates a perverse incentive structure in which employers are being rewarded for steering their employees toward high-fee products.
A letter from CFPB Director Richard Cordray regarding the new guidance can be found here.
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