Target: Richard Cordray, Director of the Consumer Financial Protection Bureau
Goal: Ensure workers are paid justly and without hidden fees
Millions of American workers get their wages via prepaid cards and not by checks. Oftentimes, these cards have hidden check-cashing, inactivity, transfer and overdraft fees, among others. Employees foot these fees, while employers, like McDonalds, are saving big money on check preparation services. This unfair practice is spreading like wildfire across the country, potentially violating federal laws regarding electronic funds transfers and fair labor standards. The government has the power to change it and make sure that people get their earnings with no strings attached.
A recent article in the New York Times titled “Paid Via Card, Workers Feel Sting of Fees” details the injustice happening in the private and public sectors. Taco Bell, Walgreens, Wal-Mart and McDonalds are among a dozen well-known companies that offer prepaid cards to their workers. State governments are also using these cards to distribute unemployment benefits, for example. According to the research firm Aite Group, in 2012 $34 billion was loaded onto 4.6 million active payroll cards, and that number is expected to rise two-fold by 2017. Of course, that is good news for employers. Visa’s website estimates that a company with 500 workers would save $21,000 a year by switching from checks to prepaid cards.
The flip side is that many fees associated with such cards have to be footed by employees, often hourly workers receiving minimum wage, effectively pushing their earnings below minimum wage. A McDonald’s employee in Milwaukee says that he spends $40-50 a month of his JPMorgan Chase payroll card. Some banks have a $25 overdraft fee, out-of-network ATM withdrawals are $2.25 and statement reprints are $5. It costs 50 cents to ask a representative for the balance on the card, $10 to close an account. There can also be a $7.50 fine for a 60-day inactivity.
It costs too much money for workers to get paid. This economic injustice is further pushing people toward poverty. They are usually the working poor without health insurance, paid sick days or other benefits. Payroll cards can be equated to wage theft, applauded by employers and big banks, which benefit from the practice. Urge Richard Cordray, the Director of the Consumer Financial Protection Bureau, to intervene and ensure that workers have a choice on how to receive their earnings and that if they choose a payroll card, there are no fees associated with it. They should not have to pay to receive wages.
Dear Director Cordray,
A growing number of public and private employers are opting for payroll cards to pay their employees. This practice certainly is beneficial to companies and banks that issue the cards, but it is hurting workers, who often are paid by the hour and live off minimum wage. They are vulnerable members of our society, most without health insurance, paid sick days or other benefits, just a paycheck away from financial ruin. Payroll cards are adding to the problem of poverty in America.
These prepaid cards very often come with hidden fees. Workers are charged for inactivity, using out-of-network ATM machines, statement reprints and inquiries, and even account closures. This practice possibly violates Regulation E, which implements the Electronic Funds Transfer Act, and the Fair Labor Standards Act.
According to the Aite Group, in 2012 $34 billion was loaded onto 4.6 million active payroll cards. That number is expected to rise two-fold by 2017. Companies with 500 employees can save $21,000 a year by switching from checks to prepaid cards. While these cards may be convenient for employers and employees, they should not come with fees. Workers should not have to pay to get paid. Please investigate this rapidly growing practice, which can be equated for wage theft, for possible violations of the electronic funds transfer law and fair labor standards.
[Your Name Here]
Photo credit: El Frijole via Flickr