‘Junk fees’ on US payroll cards hit low-income families hard, warns report ‘Junk fees’ on US payroll cards hit low-income families hard, warns report

‘Junk fees’ on US payroll cards hit low-income families hard, warns report
11 Feb 2019

Gaps in US legislation are leaving many workers exposed to ‘junk fees’ on payroll cards, according to a new report from the Center for American Progress (CAP).

The study found that relative to the population of working US citizens, payroll card users tended to be younger, occupy lower income brackets, and be more highly represented among certain communities of colour. The retail, manufacturing and fast-food industries are the sectors that use payroll cards the most.

David Madland, senior fellow at the CAP explained: "Workers are already struggling and shouldn’t have their wages further reduced by high-fee payroll cards. Policymakers need to take action so that vulnerable workers aren’t ripped off.”

The CAP’s report revealed that payroll cards charge a wide variety of different fees. Workers are often charged for actually applying for, or participating in, their employer’s payroll card scheme, for checking their account balance at ATMs and for using customer service features.

Additional fees are also applied for maintaining their account, having a low balance or account inactivity and for making point-of-sale transactions in stores or online. Further charges are imposed for issuing initial or replacement cards, becoming overdrawn on their account or for closing the account and requesting a refund of the outstanding account funds.

CAP’s recommendations include:

  • Collecting better data about how workers are paid, the level of payment choice they receive at work, and the fees that may be incurred;
  • Improving protections for consumers by banning junk fees, prohibiting overdraft and other credit features, requiring deposit insurance and ensuring better access to worker funds;
  • Requiring federal, state and local governments to use best practice for payroll cards when paying their own workers and contractors;
  • Improving enforcement of payroll card legislation to ensure workers receive the protections they are afforded in law.

Progress on payroll card protections has already been made in Connecticut, Hawaii, Illinois, New York, and Pennsylvania. But elsewhere, legislators - in Massachusetts, for example — are exploring new avenues for enshrining such protections into law.

Massachusetts State Representative Paul A. Brodeur said: “Addressing the challenges that unbanked employees face in today’s economy should be a priority for any policymaker interested in levelling the playing field for working families. The findings of the Center for American Progress’ report on wage cards will prove to be a key resource as legislators across the country explore how to balance consumer and worker protections with the realities of the marketplace.”

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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Gaps in US legislation are leaving many workers exposed to ‘junk fees’ on payroll cards, according to a new report from the Center for American Progress (CAP).

The study found that relative to the population of working US citizens, payroll card users tended to be younger, occupy lower income brackets, and be more highly represented among certain communities of colour. The retail, manufacturing and fast-food industries are the sectors that use payroll cards the most.

David Madland, senior fellow at the CAP explained: "Workers are already struggling and shouldn’t have their wages further reduced by high-fee payroll cards. Policymakers need to take action so that vulnerable workers aren’t ripped off.”

The CAP’s report revealed that payroll cards charge a wide variety of different fees. Workers are often charged for actually applying for, or participating in, their employer’s payroll card scheme, for checking their account balance at ATMs and for using customer service features.

Additional fees are also applied for maintaining their account, having a low balance or account inactivity and for making point-of-sale transactions in stores or online. Further charges are imposed for issuing initial or replacement cards, becoming overdrawn on their account or for closing the account and requesting a refund of the outstanding account funds.

CAP’s recommendations include:

  • Collecting better data about how workers are paid, the level of payment choice they receive at work, and the fees that may be incurred;
  • Improving protections for consumers by banning junk fees, prohibiting overdraft and other credit features, requiring deposit insurance and ensuring better access to worker funds;
  • Requiring federal, state and local governments to use best practice for payroll cards when paying their own workers and contractors;
  • Improving enforcement of payroll card legislation to ensure workers receive the protections they are afforded in law.

Progress on payroll card protections has already been made in Connecticut, Hawaii, Illinois, New York, and Pennsylvania. But elsewhere, legislators - in Massachusetts, for example — are exploring new avenues for enshrining such protections into law.

Massachusetts State Representative Paul A. Brodeur said: “Addressing the challenges that unbanked employees face in today’s economy should be a priority for any policymaker interested in levelling the playing field for working families. The findings of the Center for American Progress’ report on wage cards will prove to be a key resource as legislators across the country explore how to balance consumer and worker protections with the realities of the marketplace.”

Emma Woollacott

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

OTHER STORIES THAT MAY INTEREST YOU

Is crowdsourced pay the secret to fair renumeration

ADP unveils payment card system for gig workers

US union develops payroll card to circumvent fee collection restrictions

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  • Posted On February 11, 2019 by Steve Hurry

    Not very accurate reporting. Both ADP and Global Cash Card offer payroll cards that can be used at no cost for the employee. If you would like more accurate information please contact me.

    Steve Hurry

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