Employers Can't Force Debit Cards on Their Workers

October 2, 2013
credit card news

While many employers prefer to distribute wages on a prepaid debit card, also known as a payroll card, they cannot force employees to receive their wages this way. In a letter to some of the largest U.S. employers, the Consumer Financial Protection Bureau (CFPB) reminded them of the law and warned that the agency will use enforcement power to stop violations.

The CFPB has received complaints that some firms pay all employees with payroll cards, which often come with high fees for routine transactions, such as checking the card balance and withdrawing cash. One former McDonald's employee in Pennsylvania, Natalie Gunshannon, requested direct-deposit to her credit union but was told that a payroll card was her only option. After quitting, she sued the franchise owners and posted a petition on Change.org asking McDonald's to "stop paying employees with debit cards loaded with fees" and to ensure that franchisees provide more options for payment.

Nearly 4.5 million U.S. workers received a total of $34 billion in wages on payroll cards in 2012, reports financial research and consulting firm the Aite Group. These numbers could double over the next four years. The CFPB reminded employers that workers who do choose to receive payroll cards are entitled to protections that include full disclosure of fee information, access to account information, and error resolution.

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