CFPB Issues Bulletin Regarding Payroll Cards
The Consumer Finance Protection Bureau (CFPB) recently issued a bulletin regarding requirements under federal law for employers who use payroll cards to pay employee wages. Payroll cards are subject to federal requirements under the Electronic Funds Transfer Act (EFTA) and Regulation E. Here’s what employers need to know about the CFPB’s new bulletin:
- Payroll Cards Cannot be Mandated: Regulation E prohibits employers from mandating that employees receive wages only on a payroll card of the employer’s choosing. If an employee elects not to use a payroll card, the employer must pay the employee’s wages using a different method.
- Required Disclosures: Regulation E requires that payroll card holders must receive disclosures concerning any fees that may be imposed or any limitations on the types of transactions that can be made with the card. The disclosures must be “clear and readily understandable, in writing, and in a form the consumer may keep.”
- Access to Account History: A payroll card issuer must provide periodic statements to the card holder or must make the card holder’s account history accessible in some other form.
- Limited Liability for Unauthorized Use: The liability of a payroll card holder for unauthorized use of the card must be limited, provided that the unauthorized use is timely reported.
- Error Resolution Rights: If a payroll card holder makes a timely report of an error relating to the payroll card account, the financial institution must respond to the reported error.
Takeaway: Employers who utilize payroll cards must make sure that they are in compliance with federal requirements for payroll cards. Many states also have laws governing the use of payroll cards. For example, Minnesota has a payroll card statute that is similar in many respects to the requirements imposed by federal law.