Calif. governor vetoes paycard bill

On Oct. 9, 2011, California Gov. Jerry Brown vetoed a state senate bill that would have mandated employers that offer employees prepaid payroll card programs to also provide employees free banking services. In vetoing SB 931, Brown said the bill would impose numerous and costly requirements on paycard providers and likely result in banks and employers eliminating the service, to the detriment of the workers the bill aimed to protect.

According to a K&L Gates law firm report on the bill, SB 931 would have mandated employers with paycard programs to provide employees with ongoing, periodic statements in either electronic or paper form. The bill also would have imposed "the most extensive and convoluted cash access requirements of any payroll card bill in the country," the report said. Cash access requirements would have included:

• One cash withdrawal by the employee "down to the penny" for each pay period
• Four free ATM withdrawals per pay period through ATMs in the paycard issuer's network
• At least one ATM withdrawal per pay period at an ATM outside the issuer's network, and without an issuer-imposed fee

The report said the bill also contained detailed fee restrictions, as well as provisions for account fee dispute resolution, overdrafts, credit features, non-expiration of funds and replacement of expired cards. Noncompliance with SB 931 would have been considered a misdemeanor and could result in civil penalties, according to the report.

The American Payroll Association also condemned the bill. "Ultimately, it is widely believed in the industry that the increased costs and administrative burdens imposed by SB 931 will discourage the use of paycards in California because they will outweigh the benefits the cards provide to employers, thereby denying the benefits to employees as well," the APA said.

Brown said strong consumer protections are needed for paycard users and he will work with the bill's proponents and financial institutions to craft better legislation.

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