Director Richard Cordray
Consumer Financial Protection Bureau
1700 G Street, NW
Washington, D.C. 20552
Re: The use of Debit Cards in lieu of a paycheck or direct deposit
Dear Director Cordray:
We are writing today to express our concern for the growing practice by employers of issuing debit cards, also known as "payroll cards," in lieu of a paycheck or direct deposit. These payroll cards are generally issued by third-party financial institutions and carry with them various fees and charges that are often not explained up-front to the newly-hired employee, many of whom are low--to-middle-income, and the cards effectively reduce their take-home pay.
Employers may claim that payroll cards are less expensive than issuing a traditional printed payroll check or setting up a direct deposit. However, these cards often carry with them an exorbitant amount of hidden fees for everything from checking the balance, speaking with a bank representative, and using an A.T.M. to withdraw funds, to even transferring funds to an existing bank account.
As you know, current law prohibits employers from offering a payroll card as the only form of payment to employees and also requires employers to inform workers of any fees related to the use of payroll cards. However, as recent reports have pointed out, many employers are not giving their employees the option of choosing another form of payment while also failing to inform them of the various fees associated with these cards.
Many of the workers who are given payroll cards are those that earn minimum wage, and they are least able to afford these additional charges. These workers oftentimes are unaware of their rights and even if they do know that by law they are allowed to receive a different form of payment, they may fear losing their job if they complain or ask too many questions.
It has come to our attention that the Consumer Financial Protection Bureau (CFPB) issued a bulletin last year alerting employers of federal regulations that prohibit them from only offering employees a payroll card to receive their wages. However, we are concerned that not enough is being done to enforce these regulations.
We respectfully urge you to further investigate this disturbing practice, and at the very least ensure that employers are complying with current federal regulations, by providing conspicuous notice to employees as to their options of how they may receive their paycheck, and in the case of using payroll cards, by providing the employee with an upfront list of all associated fees.
The growing issue of employers taking advantage of employees through payroll cards is a serious one, and we respectfully urge you make this a top priority. Please respond within ten business days with an update on the present and future steps the CFPB has and will be taking to curtail this practice. In the midst of this still-recovering economy when the middle class and working families continue to get squeezed by stagnant wages while Wall Street banks are making record profits, employees shouldn't be asked to take even more of hit in their take home pay.
Member of Congress