Editorial: Paying for the privilege of getting paid
Earlier this year the New Hampshire House killed a proposal that would have allowed businesses to pay workers by direct deposit or with a payroll card that functions like a debit card without first getting their permission – essentially eliminating the requirement that they give workers the option of an old-fashioned paper paycheck.
For now, New Hampshire remains one of two dozen states that require the paper check option. But even here the need to better regulate the payroll card industry is clear.
An eye-opening story in the New York Times on Sunday described the significant burden of fees imposed on low-wage workers who get paid via payroll cards, voluntarily or otherwise. The cards are loaded with their pay, which they then access via ATM machines, many of which impose fees – sometimes hefty ones. Card-holders who don’t use their cards frequently enough are sometimes subject to a separate financial penalty. Workers who want to transfer money from their card to a checking account sometimes have to pay for the privilege.
Workers can be charged a fee for checking their balances, for using the card to make a purchase, to get a reprint of their account statement or to close their account.
The burden of all these fees falls hardest on those least able to afford it. The fees can take such a big bite out of workers’ pay that some are left with less than the minimum wage.
Payroll cards are, of course, a good business for banks because unlike traditional debit and credit cards, they are not subject to many of the same regulations, including recent limits on similar fees. For example, an “inactivity fee” is now banned on credit and debit cards but not on payroll cards; such fees can be $7 or more.
What can be done? In Oregon, state workers included such banking issues in their contract negotiations and won the rights to unlimited withdrawals at any bank, eliminating an overdraft fee and reducing others as well. More modestly, in New York, lawmakers have considered requiring at least one fee-free withdrawal per pay period.
Paper paychecks may well be on their way out. They’re more expensive for employers and, for most workers, less convenient. But surely it is in everyone’s interest to not have to pay for the privilege of getting paid.