Op-Ed: Financial Institutions are Coming for the Paychecks of Pennsylvania’s Low Wage Workers


By Sean Kitchen

This piece originally appeared on Raging Chicken Press and is republished with permission.

A bill that is specifically designed to allow financial institutions to plunder wages from the paychecks of low wage workers is making its way through the Pennsylvania General Assembly.  A floor vote in the Senate can come as early as June 7th.  The bill in question is Senate Bill 1265.  It was introduced in the Senate and referred to the Senate Banking and Insurance Committee on May 13th, and was sent to the Senate Floor with a unanimous 13-0 vote on May 18th.  If it makes its way through the mandatory waiting period, a vote can occur when the Senate returns for the budget fight.

Pennsylvania State Senator Don White began circulating a co-sponsor memo throughout the Senate in August, 2015, and the legislation would amend the state’s Wage Payment and Collection Act to allow employers to give payroll debit cards, in lieu of cash, check or direct deposit, to their employees.  The bill would make payroll debit cards a lawful form of payment.  Employees would be able to opt in, have their paychecks deposited to a pre-loaded debit card and spend their checks by swiping away.  Supporters describe these debit cards as an “alternative method of wage payment” and are a “safe and convenient method to receive wages when compared to cash or a paper check.”  Others see it as a way to free up time for low wage workers, which is something “many lower income individuals do not have,” and as an alternative to the fees associated with check cashing stores and purchasing money orders.

Senator White’s office did not respond to repeated emailed requests for comment.

The push to get this bill moving started two months after a Luzerne County Court of Common Please judge ruled in favor of a McDonald’s employee, who sued her employer in a class-action lawsuit over the fees associated with her payroll card.  Natalie Gunshannon quit her job and filed a lawsuit against the local franchise owners because they would not allow Gunshannon and other employees to switch their paychecks to direct deposit or a paper check.  Attorneys for Gunshannon argued that the fees associated with payroll cards sometimes brought one’s wage under the $7.25 minimum wage and it violated Pennsylvania’s Wage Payment and Collection Act because it was not considered lawful payment.

The Center for Media and Democracy’s PR Watch shows that payroll cards were on the radar of big business in 2010 when an ALEC (American Legislative Exchange Committee) committee voted unanimously on the first model bills for the debit cards.  Visa’s Vice President of State Relations introduced a model bill named the “Electronic Pay Free Choice Act,” where “an employer can force a worker to accept pay via a debit card if they do not have a bank account.”  The Roosevelt Institute stated that banks were set to lose $14 billion in profits in 2011 from regulations protecting consumers  from debit and credit card fees, but financial regulations following the Great Recession did not address fees associated with pre-paid debit cards.  The New York Times reported that in 2013 “$34 billion were loaded on 4.6 million active payroll cards” in 2012 and those numbers were expected to double in the amount of money loaded onto the cards and the number of users by 2017.  Visa claimed that a “company with 500 workers could save $21,000 a year” by switching to the debit cards.

The same report shows that low wage workers are hit with many fees from the banks issuing the cards.  There are fees for account inactivity, replacing a lost or stolen card, ATM withdraws, requesting paper statements, over drafting an account, and since there’s lack of regulations limiting payroll cards, banks are using their fees to as a way to re-generate billions in lost income from regulations placed on debit and credit card fees.

A recent report published by the Restaurant Opportunities Center focused on payroll cards inside Darden Restaurants, the owner of America’s largest restaurant chains, and found that 76 percent of employees “reported having to pay fees to access their wages at the ATM,” 63 percent reported “that they were not told about all of the fees associated with the card before it was issues to them,” and 23 percent reported “not being given instructions on to use the Darden Card.”  Employees faced a number of fees associated with the Darden Card and reported the following fees: $1.75 for out of network ATM withdrawals, $0.75 for an out of network balance inquiry, $2.00 card to card transfer fees, a $0.99 bill payment fee and a $10.00 replacement card fee.

Senate Bill 1265’s current language guarantees employees one fee free ATM withdrawal per pay-period that is below or equal to their previous pay.  Payroll card advocates see this as a way for employees to withdrawal money and have it was walking around cash or deposit it into a bank account.  The bill would not require employers to distribute pamphlets to employees explaining the fees associated with the bill, which is what New York’s Attorney General has been advocating.  It leaves employees having to read the fine print provided by the banks, and it does not protect employees from the other fees payroll card companies already charge.

Card companies may even have a way around one of the only protections the legislation offers to employees.  ROC’s report on Darden Restaurants pointed out that it would take some employees multiple days to withdrawal their paycheck because of daily withdrawal limits.  This leaves a loophole for card companies to exploit payroll card holders because the senate bill only guarantees an employee one withdrawal per pay period.

If this legislation is a sign of the changing times, the legislature must take serious actions to make sure workers are not going to be hit up with fees, but in its current form, this bill shifts the costs of the employer doing business on the backs of the employees, who will then be charged a numerous fees for using these cards.

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