MODEL LAWS
Model Payroll Card Law
Summary
A "payroll card" is a card that employers give to employees, into which the employer deposits the employee's wages. The card is then used like a debit card.
- Requires employees paid via payroll cards be given at least one free withdrawal per week.
- Prohibits employers from charging the employee fees other than to replace a card.
- Requires the employer to supply the employee with a transaction history relating to the card.
- Requires the employer to provide the employee with “low balance” and other alerts free of charge.
- Prohibits the payroll card account from being connected to any form of credit such as a cash advance on future pay.
- Requires the employer to provide the employee with a written disclosure of all terms of the payroll card.
- Provides that an employee must consent in writing to receiving pay via a payroll card and may change the method of receiving pay to any other method permitted by law at any time.
- Requires that payroll card accounts qualify for depository insurance (e.g. FDIC).
Frequently Asked Questions
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Q1: What is a payroll card?
A1: A payroll card looks like a credit card (it is usually a VISA or MasterCard). Rather than pay an employee by check or direct deposit, the employer transfers the employee’s earnings to the card. The card may then be used as a debit card. -
Q2: Must an employee have a bank account to use the card?
A2: No. -
Q3: Do payroll cards work at ATMs?
A3: Yes. It works the same as a debit card. The employee can withdraw as much money as is on the card. -
Q4: Is using an ATM free?
A4: It may or may not be free. It depends on the arrangement the employer has with the card issuer. -
Q5: Do payroll cards work like credit cards?
A5: Most don’t. Only the amount on the card can be spent. Some cards allow overdrafts and charge the holder for the overdraft. -
Q6: Can the money be taken off the card and put into the bank?
A6: Usually only by taking it out of an ATM and then depositing it. -
Q7: What are the issues related to payroll cards?
A7: There are several.- The company issuing the card is not necessarily a bank and the funds on the card are not necessarily guaranteed. If the company issuing the card went bankrupt, the funds on the card might not be available to the employee.
- If the card is lost or stolen, the employee’s liability may be greater than with a typical credit card.
- There may be fees associated with the card (see Q8 below).
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Q8: Are there any fees for the card?
A8: There may be. The types of fees that may be charged include:- a monthly fee,
- a fee after a certain number of transactions,
- an ATM fee,
- a point-of-service (POS) fee for use at a point of sale such as a store,
- a fee for not using the card for a period of time (inactivity fee),
- a fee to replace the card,
- a fee when funds are put on the card account (load fee), and
- a fee to get your money back by check.
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Q9: How does the Model Law deal with the problems with payroll cards?
A9:- Employee gets at least one free withdrawal per week.
- Certain fees are prohibited: initiation, loading, overdraft, or inactivity.
- Employees receive one free transaction history record per month.
- Employees are notified of all terms and fees.
- Employees must affirmatively agree to receive wages via a payroll card and may switch the method by which they are paid.
- The card issuer must ensure that the amounts on the cards qualify for depository insurance.
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Q10: Can bills be paid directly off the card?
A10: It is possible but depends on the particular card. -
Q11: Is interest paid on the amounts on the card?
A11: Usually not. -
Q12: Can money be added to the card?
A12: Usually not, except by the employer.