CFPB bulletin targets reliance on payroll cards
Sept. 13, 2013 – CFPB issued a bulletin Thursday to remind employers they cannot require their employees to receive wages on a payroll card and notes consumer protections that apply to the cards with respect to fee disclosure, access to account history and more.
The protections are provided under Regulation E and the Electronic Fund Transfer Act, which CFPB now administers. The rule’s disclosure requirements include requirements for depository institutions to provide cardholders initial disclosures that address limits on cardholder liability and the types of electronic fund transfers that can be made with the card.
“The CFPB has heard reports of employers, particularly in the retail and food service industries, distributing wages solely through payroll cards,” the bureau said in its announcement. It says federal law prohibits mandating pay by payroll card and adds that state law “typically governs which alternative payment methods employers must offer.”
According to CFPB Bulletin 2013-10, Regulation E permits an employer to:
- require direct deposit of wages by electronic means if the employee is allowed to choose the institution to receive the direct deposit;
- give employees the choice of having wages deposited at a specific institution, to be designated by the employer; or
- give them the choice of receiving wages by other means, such as check or cash.
The rule doesn’t include authority to require employees to receive sages by electronic transfer to a payroll card account at a particular institution, the bulletin notes.
CFPB Bulletin 2013-10