Democratic Senators write to CFPB about employer use of payroll cards


A New York Times report last month that the office of New York Attorney General Eric Schneiderman has commenced an investigation into the widening practice of employers paying hourly employees through the use of prepaid payroll cards has triggered a group of 16 Democratic U.S. Senators to send a letter to the CFPB raising concerns about fees paid by low-wage workers using payroll cards.

The NY Attorney General is reportedly looking into whether card usage fees are excessive, insufficiently disclosed, or violate New York wage and hour and wage payment laws. (As we discussed in a previous legal alert, the use of payroll cards raises a host of legal issues in addition to those being investigated by Mr. Schneiderman.)

In their letter, the 16 Senators seek clarification from the CFPB on whether particular fees violate Regulation E, which implements the Electronic Funds Transfer Act, and whether Regulation E requires employers to offer employees a payroll payment option other than through a particular payroll card. (The letter was also sent to the U.S. Department of Labor (DOL) and asks the DOL to clarify its role in overseeing payroll cards and consider rulemaking in this area). 

We expect legislative or regulatory attention to this area, which is currently marked by a patchwork quilt of state and federal laws governing payroll payment systems and practices. For more on the letter to the CFPB, see our new legal alert.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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