As the use of “payroll cards” in paying out wages to people has become popular, so has the practice of charging fees to those who use them.
Banks and credit unions typically issue these debit-style cards, onto which employers “load” workers’ weekly or biweekly wages. The employees then can spend the money with the card rather than being issued a paper check.
The system is most frequently employed in lower-paying industries, such as fast-food or retail operations. Although the system makes sense in some ways – sparing employers the expense of cutting paper checks and allowing people to access their wages without carrying large amounts of cash – it also is in need of some regulation to protect people’s earnings from charges ranging from 50 cents to $5 for any number of occurrences.
New legislation passed by the Illinois House and Senate last week would do that.
The proposal, House Bill 5622, which has been sent to Gov. Pat Quinn for his signature, includes common-sense protections for workers. For example, it would bar employers from requiring people to use payroll cards as a condition of employment. Employers also would have to provide a disclosure on fees and other terms for using the cards, and must ensure that employees have a way of withdrawing their full wages from the cards every two weeks, free of charge, at a location that is convenient.
Card issuers would no longer be allowed to charge fees for point-of-sale transactions with the cards, for loading wages onto the cards, participation fees, or inactivity fees for periods of less than a year. One transaction history must be available for free each month, along with two declined transactions a month, and provide electronic fraud protection.
The cards cannot be linked to other forms of credit, such as cash advances against future pay.
These measures, many of which were pushed by Illinois Attorney General Lisa Madigan, make sense and are a fair way of protecting wage earners from having their pay whittled away by transaction and other service fees.
Payroll cards can be a useful way for people without access to a bank account to use their money, or for people working their first jobs in a society where plastic has overtaken cash as the preferred payment method.
But the system should not be mandatory, and those who choose to use it deserve protections so that they, and not a card provider, receive the benefits of their work.