Two bills, one in the Connecticut Senate andone in the New Hampshire Senate, demonstrate how complex theregulations can be around payroll cards. Many states havelegislation that regulates how employers can pay their workers.Most of the laws operate around a basic principle that says, ineffect, that employers cannot compel workers to accept their wagesin a way that costs them money.
What this means for payroll card providers is that they need tocheck state laws where they are planning to offer programs to makesure that payroll cards are allowed. In some states, the questioncomes down to whether or not payroll cards are prohibited. Muchdepends on the wording of the legislation and the set up of theprogram.
Some employers and issuers have managed to avoid state regulatoryhassles by telling employees without bank accounts that they shouldsign up for a general purpose reloadable card. In that case, thenthe card can be used for direct deposit, but because the employeechooses the card, the employer is not compelling them to pay anyfees.
The American Payroll Association lists which states allow payrollcards on their website. Since state laws arechanging, that list is subject to regular changes, so programmanagers and issuers need to keep abreast of changes in state laws.In recent years, several states have added or changed legislationto permit payroll cards, and no states had out right banned them.The California legislature has considered changes the industrywould have considered onerous, but Gov. Jerry Brown vetoed thebill.
While state regulations play an important part in the payroll cardindustry, program manager also must remember that payroll cards areall subject to Regulation E.
The sum of all of this is that any company considering getting intothe business of payroll cards should make sure that they have arobust compliance department that can handle both state and federalconsiderations in the states where they expect to dobusiness.