A wise associate of mine once told me that if somebody tells you about a win/win proposition, it really means "we win, you get screwed." (He actually used a more colorful adjective, but that can't be used in a family newspaper.) Now Arlyn Davich, in her July 26 op-ed "In Defense of Prepaid Cards," tells us that prepaid payroll cards are a win/win/win situation, which really makes me want to run for cover. It is no doubt a win for employers (lower payroll costs) and banks (fees galore!), but a win for the "unbanked" low- and middle-income consumer? I hardly think so.
I agree with Ms. Davich that prepaid payroll cards are potentially beneficial to unbanked families, but the problem, not unexpectedly, is in the outrageous fees charged by the issuing banks. Just this month, the New York attorney general launched an inquiry into payroll card abuses and a group of 16 Democratic U.S. senators has written a letter to the Consumer Financial Protection Bureau and the U.S. Department of Labor, terming it "shocking" that low-wage workers incur so many fees using their payroll cards that "their net income ends up below the minimum wage."
The senators are seeking clarification from the bureau on whether particular fees violate Regulation E of the Electronic Funds Transfer Act, and whether Regulation E requires employers to offer employees a payroll payment option other than through a particular payroll card. These senators expressed the view that "mandating the use of a particular payroll card, with no available alternative, seems clearly to violate federal law."
My personal opinion is that prepaid payroll cards should be issued free of all fees for employees. Fees associated with issuing the cards should be paid, up front, by the employer after negotiations with issuing banks (which would compete with each other on the basis of cost). This would hopefully foster a true win/win/win situation. The employers and banks wouldn't win quite so much, but employees would win big (and wouldn't get screwed).