CFPB vows vigilance against payroll cards

The Consumer Financial Protection Bureau says it will fully enforce all consumer protection laws in order to prevent the potential abuse of mandatory payroll cards, an increasingly popular way for employers in Michigan and other states to pay their workers. The cards require workers to pay a fee to withdraw their paychecks, raising concerns that they may be illegal.

Some of the companies using payroll cards have faced complex litigation, but it remains unclear whether they are breaking the law. The CFPB explained that it would examine a number of possibly pursuant statutes to determine if mandatory payroll cards are skirting them. Among those laws is 2009's Credit Card Accountability Responsibility and Disclosure Act, which effectively prevents lenders and banks from subjecting clients to excessive fines. Similarly, the Bush administration's addition to the Electronic Fund Transfer Act implemented protections for citizens making bank transactions.

The CFPB issued a statement noting that Regulation E of the Electronic Fund Transfer Act makes it illegal for any entity to force employees to receive their paychecks via direct deposit, adding that this appears to apply to mandatory payroll cards. Some payroll cards allow for a single free withdrawal every month, but limits on ATMs may effectively prevent workers from accessing their total paychecks. The CFPB maintains that companies must thus give employees the choice to receive a traditional paper check, as well as issue comprehensive briefs regarding the fees involved with the payroll cards.

Advocates for payroll cards say they free workers from cash checking charges, ability to make digital purchases without a credit card and increased security, but many workers are still filing lawsuits over the matter. Michigan companies currently paying employees with payroll cards may wish to contact an attorney with experience in commercial and business litigation to determine whether they might be at risk for lawsuits.

Source: MintPress News, "CFPB Pledges To Enforce Consumer Protection Laws Over Mandatory Payroll Cards" Frederick Reese, Oct. 04, 2013