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06.21.16

Can Payroll Cards Be Saved in N.Y.?

Lifebelt_lifepreserver_andyThe good news is that the New York Department of Labor revised its proposed rule for payroll cards a second time, rather than issue a problematic final rule. But the bad news overshadowing some minor changes and compliance clarifications is what hasn’t changed, including a long list of prohibited fees, including overdraft, shortage or low-balance status; account inactivity and maintenance fees, among others. Industry experts are left wondering whether payroll cards will survive in the Empire State.

Make Your Comments Count

Payroll card providers are concerned that if the latest New York Department of Labor proposal becomes the rule of law, they might be forced to cease providing the service in the state. This could be a huge loss for many consumers, who would have to rely on paper checks instead of being paid electronically through payroll cards. Roughly 20 percent of households in New York State are underbanked and almost one in 10 are unbanked, according to a Pew Health Group report. Along with existing payroll cardholders, these New Yorkers wouldn’t have access to payroll card benefits, such as security, convenience and a less expensive to way manage their finances compared with cashing checks.

Comments are due by July 15. Before you submit yours, consider the following:

  1. Start with consumers. Yes, this regulation could affect your business, but start with the impact to current and prospective cardholders in New York.
  2. Don’t just present problems, offer solutions. It’s easy to point out what’s wrong with a proposal, but try to understand the intended goal of the regulation and offer alternative solutions that protect the consumer and the business.
  3. Be specific. Provide data to support your claims.

See the Regulation Room Website for more tips on writing effective comment letters. The site offers advice, such as express your views and concerns clearly, focus on the parts of the regulation that will directly affect you and if you disagree with the DOL, do it respectfully.

The N.Y. DOL is accepting through July 15. Send comments to: Michael Paglialonga, Department of Labor, Building 12, State Office Campus, Room 509, Albany, N.Y. 12240 or regulations@labor.ny.gov.

“Payroll cards are a crucial tool for millions of unbanked and underbanked Americans, including nearly 30 percent of New York households. We are relieved the department has recognized that more work is needed on the proposed payroll card rule and re-issued it for another notice and comment review period,” said Brad Fauss, NBPCA president and CEO. “But, the NBPCA continues to have concerns that the latest proposal, if left unaltered, will ultimately harm New York workers.”

The commentary in the latest proposal provides more information on complying with ATM disclosure and employee consent requirements. Employers still must provide employees receiving their pay via payroll debit cards with a list of fee-free ATM locations near their workplaces or homes. Employers may comply with the requirement by offering an updated Website or telephone-based system providing a list of ATMs.

Regarding employee consent to receive wages on a payroll card, the original proposal and the first revision were unclear, according to the NBPCA, as to whether an employer would have to seek consent from existing employees who already are being paid by a payroll debit card or direct deposit. The second revision, however, makes it clear in the commentary that “prior consent that was provided without the requisite notices or in conflict with the terms of [the rule] is ineffective.” Furthermore, even if an employee gives immediate consent, the employer still must wait seven business days before disbursing payment by card. This requirement hasn’t changed since the first revision and is one that will require employers to cut unnecessary and costly paper paychecks to employees hired mid-pay cycle.

Another troubling provision is the requirement that any change to terms and conditions of the payroll card program must be provided in writing 30 days before those changes take effect, which goes beyond Regulation E’s 21-day notification requirement solely for certain adverse changes to the terms and conditions. For providers and employers that offer payroll cards in multiple states, this requirement could be particularly problematic.

As a large influential state, New York and its final rulemaking on payroll cards could provide a blueprint for other states to follow.

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Image Credits: Andy Wright

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