Payroll Debit Cards – Less Choice, Lower Wages

by Angie Wei, California Labor Federation

Bank of America's new $5 monthly debit fee, unveiled Friday, sparked howls of protest from furious bank customers now threatening to walk away to more consumer-friendly banking options. No one knows exactly how many will follow through on the threat, but according to one poll, a $5 monthly fee will drive 66% of debit users towards alternative methods of payment—cash, credit cards, or “other.” Agree or disagree with the 66%, but at least everyone can agree that it’s good consumers can freely decide to spend however they want and bank wherever they choose, right? Wrong.

Thanks to unaffordable fees, credit checks and other obstacles, big banks have shut out about a million California households from access to any banking services whatsoever. These “unbanked” workers, unable to receive direct deposit, have in recent years found employers replacing paper paychecks with mysterious “payroll debit” cards—electronic cards that charge massive fees only a banking lobbyist could love. Employers issue cards directly to workers, wages are loaded onto an account managed by the bank, and every payday, the nickel and diming begins anew.

Workers unable to afford paycard fees don’t get to just take their business elsewhere. Unlike typical bank customers, these workers are simply stuck with whatever bank the employer chooses, and this lack of consumer choice creates a market distortion with a predictable result: sky-high fees that no retail banking consumer would ever accept.

Here’s a quick sample of some actual fees California workers can face under these contracts: $15 per month whether a worker uses their debit card or not. Every point of sale transaction costs an additional $2 and every in-network ATM withdrawal claims another $2. Replacement cards are $35, and if fees wipe out the last of a worker’s wages, the bank can take a $45 “negative balance” penalty. Even balance inquiries are $.50 and calls to a live operator cost $3 each.

For the vast majority of us, charges this unreasonable would be more than enough to propel us into the arms of a credit union or community bank less focused on punitive fines and high fees.  But the 8% without bank accounts live and work without this alternative. These employees choose from the following options: paycard issuers, equally predatory check cashing services, or a strictly cash-based existence. Fortunately, legislation offering a fourth possibility recently passed the legislature and currently awaits action from Governor Brown.

SB 931 (Evans) would authorize payroll cards, but only when the cardholder agreements meet certain conditions. For example, the card contracts couldn’t charge fees to load a payroll card or participate in the program. Card contracts will also no longer be allowed to charge workers for access to online account information and transaction histories. SB 931 guarantees an employee’s free choice between a paper check, direct deposit, or payroll card, and establishes the right of a payroll card-compensated worker to withdraw all wages once with no fees. Workers under SB 931 are also allowed four free in-network withdrawals, one free out-of-network withdrawal, and two free point of sale transactions. Modest protections, to be sure, but even these minimal standards would mean major help for minimum wage and low-wage workers.

Though millions of California workers need SB 931’s protection, the issue’s prominence and this bill’s reach extend far beyond California. Nationwide, all eyes are on our state to watch whether responsible regulation and a pro-worker Governor can beat back lies and threats from dozens of banking industry lobbyists. A victory here would mean renewed efforts elsewhere to protect the wages and living standards of America’s most vulnerable workers.  

The Governor here faces a clear choice—unlike workers paid on payroll cards. On one side is an industry that’s essentially declared war on the middle class, on the other is what’s left of a middle class ravaged by years of that industry’s greed. On one side are the world’s richest banks and their empty threats to abandon the gigantic California payroll card market, on the other are very real workers facing very real threats of bankruptcy, foreclosure, or worse, ironically from the hands of those very banks. Governor Brown, we’re counting on you to stand up to bankers bleeding hard earned wages from the workers on which our economic recovery will depend. We’re counting on you to sign SB 931.

Click here to send a message to the Governor in support of SB 931.

12 thoughts on “Payroll Debit Cards – Less Choice, Lower Wages”

  1. Let’s see, he vetoes bill to benefit farmworkers, the farm industry knows days before and he lets the workers continue to protest outside his office. Then he refuses to come out and tell them why he vetoed their bill. Coward.

    He vetoes the child care worker bill wringing his hands over the scope of the project while child care providers wring their hands over how they’re going to pay their mortgages and car notes.

    He names a former PGE exec as his chief of staff.

    He names a failed centrist Assemblywoman with a history of pro-business, anti-labor votes to be his secretary of consumer affairs.

    He names a former BofA exec (who lives in Pebble Beach no less) to be the jobs czar. Well, at least he has lots of experience laying people off.

    Jerry Brown and his incompetent staff believe completely that since he’s better than the dregs the GOP can produce, we’re all stuck supporting him. Fuck him.

  2. I’ve had it with Bank of America.  Frankly, I’ve had it with banksters.  Closed my BofA account today. Done.

  3. I consider myself well-informed and aware of all the scams thrown at workers. But I didn’t know it was even possible not to pay workers. That you could hand them some card where they couldn’t even get at their own wages without usury. It sounds like something out of India. This is appalling.

    I’d actually expect Brown to sign this one. Banksters are very unpopular right about now.

  4. As an attorney who has brought a few of these cases under the California Labor Code’s Private Attorney Generals Act, Labor Code section 2698, et seq., the law is pretty clear with regard to debit cards.  

    As it sits now, the employee must be able to cash out the debit card for the entirety of their paycheck at least once per payperiod somewhere within the State of California without discount.  This is best done at a bank that subscribes to the Visa program, and they can take out a “cash advance,” for the full amount of the paycheck without any fee. So, in general, if the debit card has a Visa and/or Mastercard logo on it, its probably compliant with the law as is.

    So, that said, how would this new law change things?

  5. Is a type of bank account that doesn’t have the kind of draft access typically associated with a checking account.  The reason that employees can’t get bank accounts (aside from those that don’t have a SSN) is that they have bad credit or are in chexsystems for overdrawing or some other reason.  If the account only allowed direct and cash deposit, atm access, point of sale access and online bill-pay banks wouldn’t have the risks associated with a checking account.  That way employees could choose the bank or credit union that best met their needs while keeping the protections associated with regulated bank accounts, FDIC/NCUA insurance e.t.c.  

  6. The law as it stands allows an employee to choose a payroll card instead of a check if the employer offers it.  With that card they can get one free ATM withdrawal if they do not want to pay any bank fees.  This card protects unbanked employeess from having to go to check cashing shops and get ripped off.  ITS A GOOD THING!

    But trust the California Labor Frderation for punching a gift horse in the mouth.  This good thing wasn’t good enough.  They wanted unlimited free banking, 24 hour customer service, and all the other banking services those of us with checking accounts have to pay for.  

    If the Governor had allowed this bill to become law the immediate impact would have been that the payroll card would have disapprared as an option for employers to pay employees forcing unbanked employees (think the lowest paid) back to the pawn shops and check cashers.

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