Prepaid payroll has recently become thetarget of Congress, regulators, consumer groups and the media. Themedia attention has either focused on poorly implemented programs,such as the one rolled out by a McDonald’s franchisee, or havecreated a story based on the worst features of several outlierprograms presented as if “payroll cards” were a single product.These articles create a distorted view of prepaid payroll cards andof the larger prepaid payroll industry in general. A clarifyingvoice in all of this is the Network Branded Prepaid CardAssociation, which offers guidance to employees, employers, payrollcard practitioners, the press, or anyone else interested inlearning the facts about payroll cards.
Over the years the NBPCA has developed and released documents thathelp employees evaluate prepaid payroll programs. With guides foremployees, guides for employers, program manager support withregulatory overviews and implementation best practices, the NBPCAcovers all the payroll bases – which is good because confusion isrampant.
Perhaps the most frequent misconception is that payroll cards, orprepaid cards in general, are not regulated, when in fact they areregulated by both federal and state agencies. The NBPCA haspublished a document written by Kevin Petrasic and Cathy Beyda ofPaul Hastings LLP called Payroll Cards: Navigating the RegulatoryLandscape which identifies the many regulatory agencies,and the hurdles each puts in place, associated with delivering aprepaid payroll card program. This document clearly shows that theopposite is true, prepaid payroll is one of the most highlyregulated products in the market today.
Media reports that discuss prepaid payroll often share a commontheme indicating that employees are not sufficiently informedregarding the fees associated with payroll cards. Clearly, it’simpossible to assure that every employee fully comprehends theterms and conditions associated with the payroll card, but theNBPCA has certainly tried to assure each employee has theinformation at their disposal in a clear and concise fashion. Ithas done this by publishing documents that directly guide employeesregarding the acquisition and use of a payroll card as well ascommunicate best practices to both employers and programmanagers.
The NBPCA has partnered with a key consumer advocacy group,Consumer Action, in developing two key tools to help employers andemployees better educate about, and use payroll cards. The 2014Employee Guide to Payroll helps employees educatethemselves on how to best use their cards to optimize the servicesthat fit their needs, and minimize behavior that drives fees (e.g.using an ATM outside of the free network provided). The guideoutlines how to comply with state and federal regulatoryrequirements, and educates employees regarding the best use of thepayroll card program offered. If the employee acquires the payrollcard, the NBPCA also has the document Payroll CardTips that will tell the employee different methods thatcan be used to minimize the costs associated with payroll cardusage.
But the NBPCA doesn’t stop there. It also teaches and promotespractices to prepaid card program managers that will improvecommunications to employers and employees and identifies how acommunications program should be orchestrated in Network Branded Prepaid Card Payroll CardLeading Practices. This document identifies the importanceof effectively communicating how the fees associated with the cardand how the card operates to employees. It also explains to theprogram manager the importance of educating the employer regardingthe card and also to assure that employees are given multipleoptions for receiving their pay.
Another common misconception is that payroll cards are moreexpensive for cardholders. The NBPCA has made research availablethat addresses this misconception by publishing PayrollCards Help the Underserved and Analysis of Network Branded Pay Cards. Thisanalysis was conducted by Bretton Woods and analyzes the costs ofpayroll cards relative to other options including basic bankchecking accounts, general purpose reloadable prepaid cards, andcash acquired through a check cashing store. These reports help toprovide an objective comparison of costs consumers could incurusing each of these options. The most common error of thosereviewing prepaid payroll cards is that they compare them only to acheck. But before the employee can buy anything, that check needsto be converted into cash for in-person payments and sometimes intomoney orders to pay bills. The prepaid payroll card eliminates thecost associated with converting a check into a useable form ofpayment. The Bretton Woods analysis takes these facts into accountand avoids the common mistake of comparing a prepaid payroll cardto a check.
I’ve only discussed a few of the many documents the NBPCA has madeavailable on the topic of prepaid payroll. Here are some additionaldocuments available on the NBPCA’s website:
The NBPCA is using its industry position as the not-for-profitvoice of prepaid, to promote and educate everyone in the prepaidpayroll value chain and has established a prepaid payroll librarythat benefits everyone from employees and employers to banks andprogram managers. Given the open access provided by the NBPCA, itis frustrating that the most common narrative in media reportspublished today remains based on misinformation.