Low-wage employers have found a way to simultaneously save themselves money and hand over some of their workers' scanty pay to the financial industry. Naturally, this is a big draw, and payroll cards—debit-like cards that take the place of normal paychecks, but have numerous fees attached—have been gaining in popularity. With employers, not with the workers who lose out. Happily, as the abusive practice grows, so does the pushback, and another state is getting ready to put a stop to it.
In Washington state, a bipartisan bill:
... mandates that workers be compensated in a form that allows them to avoid “any fees or costs.” It also requires employers who use payroll cards to offer workers at least one alternative means of wage payment, such as a traditional paycheck.
A hearing is scheduled Wednesday in the state Senate Committee on Commerce and Labor in Olympia. The bill already passed the House by a 98-0 vote earlier this month. One of the legislation’s leading advocates, Republican insurance agent Rep. Graham Hunt, sponsored the bill after being contacted by a concerned constituent, according to the Olympian newspaper.
Similar measures have been passed in Illinois and Hawaii, and are being considered in other states, with business lobbying hard against them. If you could take out high and often undisclosed fees, payroll cards
aren't necessarily a bad idea:
Consumer advocates believe that proper regulation can ensure that the cards are a net positive for so-called “unbanked” Americans. “For unbanked workers, payroll cards can mean no check cashing fees, greater security without the risks of cash, access to pay despite natural disasters and the ability to make purchases over the internet and by telephone,” National Consumer Law Center (NCLC) managing attorney Lauren Saunders said in the summer of 2013. But if the fees that are associated with the cards are egregiously high or concealed from employees, or if an employer doesn’t give workers any other choices for how to get paid, the bad can quickly outweigh the good.
And of course such abuses are common. States aren't the only level of government trying to rein in those abuses. The Consumer Financial Protection Bureau is getting ready to issue regulations requiring card companies to disclose fees and make money available by other means if people want—but that doesn't mean states shouldn't pass their own laws to ensure that every possible loophole is closed and the wages of the workers who can least afford to lose out are protected.