APA thinks paycard bill a 'step backward'

The American Payroll Association said legislation currently working its way through the California congress would require employers that provide prepaid payroll cards to its employers to also provide free banking services. The ABA believes such a requirement goes "far beyond" what is obligated for any other payroll payment method.

A payroll card bill (AB 51) passed the California Assembly in June 2011 and is currently being considered by the California Senate as SB 931. The APA said it succeeded in having the legislation altered to remove language that would have exposed employers to "massive penalties for minor offenses."

SB 931 provides what the APA called a "laundry list" of services that employers must provide employees in addition to payroll cards. The additional services include multiple free ATM transactions and multiple calls to costumer service centers.

"These items are expensive services for issuers to provide," the APA said. "The industry standard is to provide one means per pay period for an employee to receive his or her entire wages without incurring a fee. Interactive voice response systems for customer service are also standard."

The APA noted that card issuing banks are expected to experience billions in revenue shortfalls due to the passage of the interchange fee cap imposed by the Durbin Amendment to the Wall Street Reform and Consumer Protection Act of 2010; the consequence is that banks are eliminating free consumer checking and charging consumers more debit card fees to make up for lost revenue.

By issuers shifting paycard costs to employers, the savings employers achieve over paper checks will be negated, according to the APA.

"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.

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