Employers Switching From Payroll Checks To Prepaid Cards With Fees 1103
An anonymous reader writes "The New York Times reports a growing number of American workers are being paid by prepaid payroll card. The cards often have fees attached to basic services like making a cash withdrawal or for inactivity. Some employees report that the employers pay by card by default, with paperwork barriers to opting out, and some report that their employers refuse to pay them by check or direct deposit. The issuing banks pitch the cards to employers as a cost-cutting payroll alternative, and sometimes even offer a financial reward for each employee they sign up."
article missed some points (Score:5, Informative)
The NYTimes talks about the fees that come along with the use of a preloaded debit card, but in some states (e.g. California), there is a legal requirement that the employee be able to get their pay without any fees, etc. , and at a location convenient to them. No paycheck drawn on a bank in some other state with only 3 branches in that state, etc.
Mind you, that doesn't mean that employers actually follow the rules, or that the employees, who typically are spending all their time just staying alive, will pursue this with the Dept of Labor Standards Enforcement, but at least it is the law.
Re:Weekly/Monthly Salary (Score:4, Informative)
As someone who gets paid once monthly -- it's not that bad, once you get your budget set up. I get paid on the last day of the month, unless that is a weekend, in which case I get paid the Friday before. I have *most* of my bills set to be due on the 5'th, so I get them all out of the way right up front. I have a few that are due around the 20'th, but since they are stable (IE: they don't change), it's easy to budget around them.
State of Oklahoma as well (Score:5, Informative)
This frustrated me this year. I received a pre-pair card from the State of Oklahoma for my OK Tax Return. I swear I filled out the direct deposit info, but perhaps I didn't (I could check my copies...). What upset me is the fees for funds withdrawals/etc. This is my money, the state and its corporate partner shouldn't be making money off me when I try to get it.
The card did allow a single withdrawal without a fee at an ATM. I couldn't find an ATM it would work in. Finally logged in to the associated website and transferred to my banking account, with a $0.75 fee. What a crock!
Here's the Oklahoma website pdf detailing the info: http://www.tax.ok.gov/it2011/RefundCard.pdf [ok.gov]
and their FAQ: http://www.tax.ok.gov/faq/faqDEBITCARD001.html [ok.gov]
Already in the courts (Score:5, Informative)
There are already lawsuits over this practice (Score:5, Informative)
This one makes the point well.
http://consumerist.com/2013/06/17/ex-mcdonalds-employee-sues-because-she-doesnt-want-her-paycheck-on-a-prepaid-debit-card/ [consumerist.com]
Re:Perfect is the enemy of good. (Score:5, Informative)
The system of prepaid cards with fees is not the perfect solution for poor workers. But it is better than the old system of paying them with checks. Free checking is not available in most banks.
Then why not fix that problem? You also enable poor people to pay bills electronically, buy things online, etc.
British banks have to* offer a "basic bank account", which has no fees (as normal in the UK) but doesn't allow any borrowing, and so doesn't require a credit check. If you have a valid identity document, and don't have "multiple convictions for fraud", you can get one: http://www.moneysavingexpert.com/banking/basic-bank-accounts [moneysavingexpert.com]
It's not that well publicised. For a while, I lived with some Eastern European immigrants in a cheap flatshare in London. They were keeping cash under the bed, but they all were able to open a basic account.
*As is often the case in the UK, instead of a law or regulation the industry is doing something on the understanding that if they didn't, there'd be a regulation, and it'd be worse for them.
Bank fees (Score:5, Informative)
No, it's a franchisee getting sued. (Score:5, Informative)
McDonald's is NOT being sued. McDonalds has nothing to do with employee payroll processing in individual restaurants. The franchisee pulling this stunt is the business getting sued.
Well two problems with that (Score:5, Informative)
1) You can, indeed, get free checking from Credit Unions pretty easy. Some banks too. There really are places that'll do business with you for no money up front and they won't charge you fees so long as you don't do things like overdraw.
2) They say companies are trying to do this instead of direct deposit. DD costs companies next to nothing. The Automated Clearing House (which is how they all do it) charges $0.35/transaction. This is why companies like to pay people that way. It adds just a trivial cost, and it all automated, the money comes out of their account in to yours. Well the only reason to go prepaid cards instead would be because the bank is bribing them, not because it is cheaper because the ACH cost is just fucking trivial.
This is not a matter of being nice to poor employees, this is a matter of fucking people over.
I could certainly understand offering it as an option. Maybe some employees would find it convenient or financially advantageous. But trying to force people on it? That is just trying to screw them over for a very minor benefit. Like I said, ACH is $0.35/transaction (or 0.06% of a minimum wage paycheck, not counting payroll tax and all that jazz if you want to look at it that way) and it is good bookkeeping wise since the transaction hits right away so you know the status of your current accounts.
Re:Weekly/Monthly Salary (Score:2, Informative)
Who knew there were so many state laws on this:
http://www.dol.gov/whd/state/payday.htm
Re:How is this legal? (Score:5, Informative)
and my union negotiated away double time overtime in favour of time and a half in exchange for union dues being deducted from the lump sum signing bonus...
But, you know, your stories are good too.
Not for hourly workers they don't. (Score:5, Informative)
I worked at one time where I was paid with one of those cards.
We were paid weekly because we were peon min wage packers.
It was free to transfer to a bank account. There were no fees if we kept a balance - I moved my money out of the card as soon as the company deposited money into it because I didn't trust them.
Anyway, I don't have the fee schedule in front of me to make further comments about the particular card I have.
But the point is, peon min wage jobs pay weekly.
That was a shitty job. You had to show up over an hour before you could even clock in with the hopes of getting selected to work that day. If you got selected, you were able to go to the head of the line the next day. If you had to take a day off, you lost your spot and back in line.
If you weren't selected, you just spent you morning -5AM - 6AM waiting around for no pay. A lot of folks got discouraged and never cam e back after a couple of days waiting around and not working.
The body shop that brought the workers in was ALWAYS recruiting more and turning away more in the mornings - it was retarded.
They would train people on a machine, and the operator would work for a month or two, and then when business dropped they would not call anyone into work.
There were many times as a machine operator where if you still needed to work, they would demote you and you were back to min wage loading machines or packing games.
And when business was slow, no work at all.
And then after work, you had to stand in line for about a half hour - UNPAID - in order for security to search you to make sure you're not trying to smuggle out a video game.
So, you would spend at least 90 minutes a day at the plant unpaid.
Don't like it, you don't have to work there.
And the treatment by the company! It was clear that you were crap. Nothing. That you could be replaced at ANY time - and it was true. There are so many desperate people WANTING to work - contrary to what the conservative pundits say -that they can replace you at ANY time.
The poor are treated like garbage in this country. They are treated as subhuman. And when you're constantly treated that way you start to wonder if it's true.
We, the US, are a class based society - with very little mobility. And if you fall off your rung on the ladder, good luck getting back up it's nearly impossible. Just try saying in an interview - if you actually get one - "when I was out of development work, I worked a min wage job 11 hours a day."
And the industry still expects you to keep your skills up having to live that way.
Re:How is this legal? (Score:4, Informative)
Except if you compare private sector wages in right-to-work vs. collective bargaining states. GDP per capita differences are all over the place, but in states that don't engage in union busting, wages are higher.
Re:Perfect is the enemy of good. (Score:5, Informative)
Performing any transaction other than an in-person sale via cash is *heavily* discouraged in the US, for a variety of reasons. For one, the government frowns on it because it is a great route for money laundering and tax evasion. Paying people's wages and salaries in cash has been close to non-existant for decades.
Re:How is this legal? (Score:5, Informative)
Recognize:
(1) This situation is often better than the alternative, where the employee gets a check and has to go to a check-cashing place, which charges even higher fees.
(2) The card fees are generally transaction-based, so the fewer transactions, the less in fees: The guy in the article who spends $40/month on fees is a moron: He should take all the money out in one fell swoop. That might cost him $1.75, but that's far less than he would have paid at a check-cashing place.
(3) Despite what the article says, this is usually what happens when the employee doesn't choose direct-deposit. There may be a few employers out there who are actually dropping direct-deposit, but the majority of employers are using these cards only for those people to whom they usually issued checks.
I don't understand why so many low-income people don't have bank accounts. Free checking still exists at smaller local banks and credit unions (check out first citizens, for example). If they got bank accounts with direct deposit, they could move away from these cards.
That said, it is disgusting how the big banks seem to be gleeful about making money on the ignorance of poor people.
Re:Weekly/Monthly Salary (Score:5, Informative)
Quite true! Once you find yourself in ChexSystems (I think that's what they're called), you're blacklisted from all traditional banks.
But then, hardly anybody takes checks anymore, and those that do often process them electronically on the spot, eliminating much of the "benefit" of checks for poor people (namely, "floating" checks a few days before you get paid when you don't have the balance to cover it.)
I was young and poor once. Juggling checks so I could get by without bouncing any is an art all its own, and a much harder one to accomplish nowadays.
Re:Not for hourly workers they don't. (Score:5, Informative)
too bad you do not work in a state that protects workers. here you document your time and turn it in to the labor board. They get fined and forced to pay you 2X your pay for that missing time. they CAN NOT LEGALLY make you clock out to be searched by security.
Re:Weekly/Monthly Salary (Score:5, Informative)
Yes, that $10 (which at most CUs is refundable when you close your account) is better than being charged $4 every time you want access to your money, but a lot of poor people simply don't think that far ahead, and have zero financial management ability whatsoever. I've seen it with people I've hired for domestic duties; they use check-cashing stores for absolutely everything.
Re:How is this legal? (Score:5, Informative)
I live in a country free from unions.
Last month our boss did not pay out R&D salaries. "Project is late, nobody gets paid until you deliver." From experience we know
that the first one to file a suit is fired, possibly with false accusations of sexual misconduct at work. Seen it happen.
Too bad I am dependent on the company to stay in the country, if I quit I am thrown out within five days, with nowhere to go. So
I am hoping I get my June and July salary in August (because the project is still not on par with management expectations).
That is what you get without unions. Someone who can gather everyone at the company and say: "nobody works until you pay".
Re:Weekly/Monthly Salary (Score:5, Informative)
The benefits to monthly payroll are purely for the employer- they don't have to spend as much processing payroll since it happens half as often, and they can earn more interest on the money before giving it to you.
By this argument, everyone ought to get paid daily, assuming banks calculate interest daily where you are. At some point, it just becomes absurdly inefficient.
Paying monthly in arrears is the standard for salaried work here in the UK, and since most household bills are also monthly and the related government tax calculations tend to be monthly, everything lines up just fine.
And it's not your money they're holding on to, if your contract says you'll be paid monthly in arrears. It's theirs until payday, in black and white. If you don't like that, negotiate yourself a tiny payrise or something to compensate for your lost interest.
By the way, you're pretty much wrong about the whole interest-earning thing for businesses as well. Here in the UK, businesses earn about 0.1% annual interest rates on money in most bank accounts. The amount they save by deferring salary payments to monthly instead of some more frequent interval is negligible. The saving is in halving the admin overhead (relative to fortnightly payments) and making fewer financial transfers (for which banks will charge a fee).
Re:Wage Theft (Score:3, Informative)
Any free market depends on meaningful choices. Those actually have to exist and be usable in order for a free market to exist. Quite often they don't.
Re:How is this legal? (Score:5, Informative)
Seriously, Detroit isn't a state, and right-to-work West Virginia lost the same quantity of coal-related jobs when the U.S. de-industrialized a bit over the last decades. There are multiple factors in play, which makes cherry picking easy, and people in union allowing states are better off on average.
A bit more detail on just how dramatic the difference in wages is, and yes, there is a rising tide effect where non-union employees earn more in a union state: Not just an opinion [epi.org]
Re:Weekly/Monthly Salary (Score:4, Informative)
The Nigerian scam still works on this principle. They send you a check drawn from a foreign or at least out of state bank. You deposit it and the check clears. One business day later all of the funds are available. If you're stupid enough to send them the money, when your bank finally figures out that the check was worthless, they back-charge your account. You end up several thousand dollars negative that you have to repay out of your own pocket.
Despite the instant clearing, this process can sometimes take 8 weeks to play out.
LK
Re:Weekly/Monthly Salary (Score:5, Informative)
and the banks have fun with the float time. If they see a check come through for a high amount that can drain the account, it will go through fast. Instead of one bounced check, that big one magically finds its way to the front of the line so that all the little checks that had not cleared yet have insufficient balance.
Re:Weekly/Monthly Salary (Score:2, Informative)
Yes. As a member of the Board of Directors for an HOA, I see it all the time. Before a house in an HOA is sold, there is an inspection for violations. The results go into the package that all new homeowners get and should be presented to the new or prospective homeowners before signing. The reason for that is because the new owner becomes responsible for all violations, so the inspection is there for disclosure and as a point where the new homeowner can make sure that either the old homeowner fixes them, or the price is adjusted to deal with the extra hassle.
Many new homeowners indicate that their packages do not include the inspection report when the deadline to fix their house passes. Of course, many of them are lying about that, or simply didn't read that material. Still, in many cases, we believe that the real estate agent is either not very good at what they do, or they are purposely leaving that document out so that nothing complicates the sale. We know this because the management company has on record when a copy of the inspection has been requested and delivered. So, we know that the material has been delivered from us to the buyer's agent.
Whatever the cause, this leaves the new homeowners on the hook for potentially thousands of dollars in repairs, and there is often a deadline to get those repairs completed. As you would expect, this leads to a great deal of drama.
Word to the wise, real estate agents need to be carefully monitored, and you need to make sure you are getting all your paperwork and READING all your paperwork. They are looking to get you into a house, or to sell at all costs (depending on who they represent), and a lot of them are either bad at representing you properly, or they are alternately quite willing to screw you over to get you into a house and get their commission as fast as possible.
Re:How is this legal? (Score:4, Informative)
In a lot of cases, you can't, even if there's a branch conveniently located nearby. I've seen banks that would charge a fee to cash a check drawn against that bank, because the check casher didn't have an account at that bank.
Re:How is this legal? (Score:3, Informative)
You can see the results of union representation in Michigan. How are those strong unions working out for Detroit? I don't think wages and standards of living are based on union strength. Texas isn't exactly a union friendly state and they are doing pretty well.