New York Department of Labor issues final regulation on payroll cards

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New York Department of Labor (DOL) has finally passed regulation on payment of wages through payroll debit cards in the state despite major opposition from prepaid card association. The regulation include rules regarding approval for payment of wages through these cards from employees, removal of unwanted charges and complete disclosure of terms and conditions related to usage. Previously, DOL had released a preliminary caution against employers who pay through prepaid payroll cards because of concerns over the payment method and charges. Furthermore, the regulation states that employees must be provided with supportive ATMs within work area proximity along with unlimited cash withdrawals and removal of maintenance and overdraft charges. In the final draft, the regulation has been eased on seeking approval from existing member employees. Companies now need to obtain official confirmation from new employees for payment through payroll cards after implementation. The regulation which was initially proposed on 5^thJune, 2016 will take effect from 7^th March, 2017.

Network Branded Prepaid Card Association (NBPCA) majorly opposed the new regulations stating that it would result in additional costs for maintaining separate compliance programs for payroll card usage by workers.

Approximately 2 million workers are currently paid through this system and there had been issues related to higher charges and hidden costs associated with the cards which sometimes lowered withdrawal amount in comparison to wages received in a significant level. This in some cases even resulted in wages going down the minimum lower limit.With new regulation, this scenario is expected to be controlled. However, payroll cards have been a source of effective financial services for unbanked population of New York including 30% households and new regulation has put burden on service providers for fresh compliance norms. This is likely to increase the charges in other areas which might impact overall financial inclusion strategy in New York state.

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