CFPB reminds of paycard regulations

In a Sept. 12, 2013, bulletin, the Consumer Financial Protection Bureau reminded employers that they cannot require their employees to receive wages on prepaid payroll cards. The bulletin also outlines the federal consumer protections that apply to paycards, such as fee disclosure regulations, access to account histories, limited liability for unauthorized card usage and error resolution rights.

The CFPB reports that some employers, particularly in the retail and food service industries, distribute wages solely via paycards, which violates federal law. The Electronic Fund Transfer Act and Regulation E of the EFTA, as updated by the Dodd-Frank Reform Act of 2010, gives the CFPB regulatory authority over paycards The bureau added that state law typically governs which alternative payment methods employers must offer.

Noting that employees with paycards have complained of being assessed "unexpected" fees for ATM use, teller withdrawals and checking card account balances, the CFPB reiterated that federal law stipulates certain consumer protections, including:

• Fee disclosures: Users must receive disclosures of any fees they may incur when using the cards.
• Account history access: Card issuers must provide account access via phone, online and in paper form when requested. Account histories must include information on fees imposed.
• Limited liability for unauthorized use: Users' liability for unauthorized use of their cards is limited, provided the unauthorized use is reported within a certain time period.
• Error resolution rights: If users report paycard account errors, financial institutions are obligated to respond within a proscribed period of time.

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