So-called payroll cards used in lieu of traditional pay methods

The Consumer Financial Protection Bureau (CFPB) has issued a bulletin as a result of recent complaints it has received from workers regarding receiving their pay on debit cards, or so-called payroll cards.

According to a 2011 survey done by Federal Deposit Insurance Corp. nearly 4 million U.S. households, or 3.2 percent, have someone who receives wages via a payroll card. The cards are often used by people who do not have bank accounts.

Complaints from workers received included fees for withdrawing cash and checking card balances. Critics of these cards are reporting that the high fees on the cards mean that some workers are essentially making less than minimum wage.

The agency said that by law workers must be able to choose how they receive their wages and that companies cannot require employees to receive their pay this way and that there must be other options. If they choose to be paid with payroll cards, they are entitled to various protections such as disclosure of fees.

McDonald's challenged for use of payroll cards

A woman who worked at a McDonald's in northeastern Pennsylvania recently filed a class-action lawsuit challenging the company's use of payroll cards. Attorneys for the restaurant owners have said the debit cards are “the functional equivalent” of cash or checks and that the employees consented to the method of payment.

The consumer agency states it has received reports of companies, especially in the retail and food-service industries, paying wages only through debit cards, rather than offering payment options. The agency said it has the authority to enforce the law against anyone in violation, including employers as well as the banks that issue payroll cards.

“The bureau intends to use its enforcement authority to stop violations before they grow into systemic problems,” it said. The CFPB is doing what it can to ensure that the companies comply with the consumer-protection laws for the employees.