Friday, July 12, 2013
The lawsuit said that in May 2013, McDonald's employee Natalie Gunshannon was given a Visa Inc.-branded paycard issued by the retail bank of JPMorgan Chase & Co. According to the suit, and Gunshannon's own personal account, she was not given an option to have her pay direct deposited to a bank account or issued via paper check. In a petition posted on Change.org, single mom Gunshannon said she objected to activating the Chase Payroll Card because it charged "heavy fees" for such actions as ATM withdrawals and balance inquiries.
The lawsuit stated that the Chase Payroll Card charges a $1.50 ATM withdrawal fee and $1.00 balance inquiry fee. As a worker barely making minimum wage, Gunshannon could not afford to have her pay eaten up with fees, she said. She subsequently quit her job at McDonald's over the issue. Her Change.org petition asks that McDonald's provide more options for its employees to receive their pay.
The lawsuit alleges that McDonald's knowingly and intentionally violated the Pennsylvania Wage Payment and Collection Act by refusing to pay Gunshannon and the class of McDonald's employees their wage compensation as provided by law. McDonald's has distanced itself from the business practices of its franchisee, a Pennsylvania couple that operates 16 McDonald's locations in Pennsylvania. The franchisee has reportedly started to provide more paycheck options for its employees.
Meanwhile, on July 2, 2013, the office of New York Attorney General Eric T. Schneiderman sent letters to 21 retailers with operations in New York state. The letters request information about the retailers' paycard programs to ensure compliance with New York laws. Said laws require that employees give advance written consent to be paid by paycards and that employees receive all of their wages without incurring fees. "[W]e are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees' take home pay," the letter stated.
First Data Corp., the largest acquirer in the United States, does not provide paycard services for McDonald's, but it does for Wal-Mart. Through its Money Network Payroll Distribution Service, First Data began its paycard partnership with the big-box retailer in 2009. But Wal-Mart does not restrict its employees to receiving wages only via the card. At the time the partnership began, Wal-Mart had 1.4 million employees nationwide, with roughly half of them receiving their pay via direct deposit to bank accounts and the other half (some 700,000 workers) getting their pay deposited onto paycards.
Additionally, Wal-Mart employees, many of them part-time workers, can deposit wages from other jobs onto the cards. They do that by accessing First Data's paycard reload network, which includes The Western Union Co. and Moneygram International Inc. locations, as well as Wal-Mart locations. By transitioning away from paper checks and to paycards, Wal-Mart expected to eliminate the time and expense of cutting 18 million paper payroll checks, which costs roughly $2 per check to process.
A May 2013 white paper published by First Data touched on the regulatory complexities of the U.S. paycard market. In Eliminating Paper Paychecks: Best Practices for Implementing a Successful, Compliant Electronic Payroll Distribution Program, First Data's Rob Kirsh said that most of the 50 states allow employers to offer employees the direct deposit option, while some states permit employers to offer the paycard option, and only a few states "allow a 'default' to [a] paycard, if the employee has been given the opportunity (and time) to elect direct deposit."
In addition, Regulation E of the Electronic Fund Transfer Act states that employers cannot require employees to receive wages electronically via any particular financial institution. Given this intricacy, employers with operations in multiple states would be wise to implement paycard programs that operate equally in all states, Kirsh advised.
Michelle Jun, Staff Attorney at Consumers Union, the nonprofit publisher of Consumer Reports, said that fees vary widely across the paycard sector. It is not an easy task for consumers to compare the fees of different paycards because the contracts are often just between employers and employees. Therefore, the practices of the paycard industry are not subject to public scrutiny.
"As far as transparency, I would say there probably is little to none," Jun added. "And it probably differs from card to card in terms of the information about the fees that are provided to the employee once they obtain the payroll card."
Despite the additional reload functionality exhibited by the Wal-Mart paycard, Jun said generally speaking paycard programs restrict employees to receiving only their pay on the cards. "I think it has to do with fraud, so you know the funds are coming directly from the employer and that that card is going to be funded," she said. "If you're depositing a check from some other source, the bank can't be 100 percent assured that it's legit."
Jun recommended that paycard providers follow the lead of general-purpose reloadable card providers and make fee and other program details easily assessable to the public. "If payroll card companies can emulate that model, they probably will be better off," she said.
Editor's Note:
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