WASHINGTON, DC – U.S. Sen. Robert Menendez joined with 15 colleagues in calling on the Consumer Financial Protection Bureau (CFPB) and Department of Labor (DOL) to investigate the fees and practices associated with pre-paid “payroll cards” which some employers use to pay employees instead of payroll checks or direct deposits. Often these cards come with fees for ATM usage, balance inquiries, swipe purchases, overdrafts, and inactivity that pose a real financial risk, especially to low-wage workers. They may also violate existing consumer regulations.
“No workers – and especially lower income workers – should have to worry about hidden fees taking a bite out of their hard-earned paychecks,” said Menendez (D-NJ), author of the Prepaid Card Consumer Protection Act which requires full disclosure of fees before the consumer purchases a card and limited the types of fees that can be charged.
Recently, The New York Times reported that the fees attached to these cards can be so exorbitant that some workers end up making less than the minimum wage. In addition, there are serious concerns that workers are being pressured or coerced by their employers into receiving their salaries on pre-paid cards. In fact, The New York Times reported that some employers receive commissions for each employee they sign up to a particular pre-paid card, which creates a perverse incentive structure in which employers are being rewarded for steering their employees toward high-fee products.
In a letter to the CFPB and DOL the Senators wrote: “We must send a loud and clear signal that we will not tolerate financial products that take advantage of vulnerable, low-income workers. We must ensure that workers are provided with adequate disclosures about their rights under federal law and the fees associated with particular cards.”
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