Today's "Let's See How We Can Fuck Over the American Worker" Thread

[CountDeMoney]

As Pay Cards Replace Paychecks, Bank Fees Hurt Workers
By JESSICA SILVER-GREENBERG and STEPHANIE CLIFFORD
New York Times
Published: June 30, 2013

A growing number of American workers are confronting a frustrating predicament on payday: to get their wages, they must first pay a fee.

For these largely hourly workers, paper paychecks and even direct deposit have been replaced by prepaid cards issued by their employers. Employees can use these cards, which work like debit cards, at an A.T.M. to withdraw their pay.

But in the overwhelming majority of cases, using the card involves a fee. And those fees can quickly add up: one provider, for example, charges $1.75 to make a withdrawal from most A.T.M.'s, $2.95 for a paper statement and $6 to replace a card. Some users even have to pay $7 inactivity fees for not using their cards.

These fees can take such a big bite out of paychecks that some employees end up making less than the minimum wage once the charges are taken into account, according to interviews with consumer lawyers, employees, and state and federal regulators.

Devonte Yates, 21, who earns $7.25 an hour working a drive-through station at a McDonald's in Milwaukee, says he spends $40 to $50 a month on fees associated with his JPMorgan Chase payroll card.

"It's pretty bad," he said. "There's a fee for literally everything you do."

Many employees say they have no choice but to use the cards: some companies no longer offer common payroll options like ordinary checks or direct deposit.

At companies where there is a choice, it is often more in theory than in practice, according to interviews with employees, state regulators and consumer advocates. Employees say they are often automatically enrolled in the payroll card programs and confronted with a pile of paperwork if they want to opt out.

"We hear virtually every week from employees who never knew there were other options, and employers certainly don't disabuse workers of that idea," said Deyanira Del Rio, an associate director of the Neighborhood Economic Development Advocacy Project, which works with community groups in New York.

Taco Bell, Walgreen and Walmart are among the dozens of well-known companies that offer prepaid cards to their workers; the cards are particularly popular with retailers and restaurants. And they are quickly gaining momentum. In 2012, $34 billion was loaded onto 4.6 million active payroll cards, according to the research firm Aite Group. Aite said it expected that to reach $68.9 billion and 10.8 million cards by 2017.

Companies and card issuers, which include Bank of America, Wells Fargo and Citigroup, say the cards are cheaper and more efficient than checks — a calculator on Visa's Web site estimates that a company with 500 workers could save $21,000 a year by switching from checks to payroll cards. On its Web site, Citigroup trumpets how the cards "guarantee pay on time to all employees."

The largest issuer of payroll cards is NetSpend, based in Austin, Tex. Chuck Harris, the company's president, says it attracts companies by offering convenience to employees and cost savings to employers.

"We built a product that an employer can fairly represent to their employees as having real benefits to them," he said.

Sometimes, though, the incentives for employers to steer workers toward the cards are more explicit. In the case of the New York City Housing Authority, it stands to receive a dollar for every employee it signs up to Citibank's payroll cards, according to a contract reviewed by The New York Times. (Sheila Stainback, a spokeswoman for the agency, noted that it had an annual budget of $3 billion and that roughly 430 employees had signed up for the card.)

Another McDonald's worker, Natalie Gunshannon, 27, says the owners of the franchise that she worked for in Dallas, Pa., refused to deposit her pay directly into her checking account at a local credit union, which lets its customers use its A.T.M.'s free. Instead, Ms. Gunshannon said, she was forced to use a payroll card issued by JPMorgan Chase. She has since quit her job at the drive-through window and is suing the franchise owners.

"I know I deserve to get fairly paid for my work," she said.

The franchise owners, Albert and Carol Mueller, said in a statement that they comply with all employment, pay and work laws, and try to provide a positive experience for employees. McDonald's itself, noting that it is not named in the suit, says it lets franchisees determine employment and pay policies.

Some employers and card issuers contend that the payroll cards are useful for low-wage workers who do not have bank accounts. They also say that the fees on the cards are usually lower than those associated with check-cashing services, which are often the only other option for people who do not have bank accounts.

"An unbanked employee is likely to be subject to a check-cashing fee when they try to cash a payroll check," said Nina Das, a Citigroup spokeswoman. She said that "someone cashing a payroll check for $500 would end up paying $15 at a 3 percent check-cashing fee."

This population — people who tend to use few, if any, bank services, is swelling. About 10 million households in the United States do not use a bank at all, up from nine million four years ago, according to estimates from the Federal Deposit Insurance Corporation. And 24 million households that do have a bank account still use expensive financial services like prepaid cards, the agency said.

For banks, looking to recoup billions of dollars in lost income from a spate of recent limits on debit and credit card fees, deals to issue payroll cards can be lucrative — the products were largely untouched by recent financial regulations. As a result, some of the nation's largest banks are expanding into the business, banking analysts say.

The lack of regulation in the payroll card market, while alluring for some of the issuers, can potentially leave cardholders swimming in fees. Take the example of inactivity fees that penalize customers for infrequently using their cards. The Federal Reserve has banned such fees for credit and debit cards, but no protections exist on prepaid cards. Cards used by more than two dozen major retailers have inactivity fees of $7 or more, according to a review of agreements.

Some employees can also be hit with $25 overdraft fees, called "balance protection," on some of the prepaid cards. Under the Dodd-Frank financial overhaul law, banks with more than $10 billion in assets are barred from levying overdraft fees on customers' checking accounts.

Many fees are virtually impossible to dodge, some employees say. A Victoria Secret's employee, Bintou Kamara, for example, said it cost her $1.50 just to transfer money from her Citi payroll card to her checking account.

"I just make such little money that it seems like a lot to pay just to get access to it," said Ms. Kamara, 23, who works as a sales clerk in New York.

Naoki Fuji, a policy associate at Retail Action Project, an advocacy organization for retail workers, said, "These are people who can least afford to fork over huge fees."

On some of its payroll cards, NetSpend charges $2.25 for out-of-network A.T.M. withdrawals, 50 cents for balance inquiries via a representative, 50 cents for a purchase using the card, $5 for statement reprints, $10 to close an account, $25 for a balance-protection program and $7.50 after 60 days of inactivity, according to an April presentation by the company reviewed by The Times.

Patrick Brown, NetSpend's senior vice president, said the company was "passionate that consumers can access their wages free of charge," providing an A.T.M. navigator to help employees find fee-free cash machines.

Some large retailers, like Home Depot, Walmart, Walgreen and Limited Brands, the parent company of Victoria's Secret, say they let employees choose whether they will receive their wages through direct deposit or a prepaid card, along with checks in some cases.

In other cases, employees say that while they do get some free cash withdrawals at certain A.T.M.'s, it is difficult to find the right machines in their neighborhoods. Ms. Das of Citigroup said that its "payroll card holders have access to over 27,000 A.T.M.'s across the country."

Problems arise, though, when employers mandate the use of prepaid cards. In 25 states, employers are allowed to forgo paper checks and offer direct deposit or payroll cards; in the remaining states, regulations are less clear and employers are taking a risk by not offering a paper-check option, too, according to research by Madeline K. Aufseeser, an analyst at Aite. It is unclear how many employers offer payroll cards.

For low-wage employees, the fees can lead to unusual solutions.

Krystal McLemore, 22, makes $7.65 an hour at a Taco Bell in St. Louis. She said she was told to sign up for a payroll card. (Taco Bell says it "offers direct deposit and a voluntary option of payroll cards as an added convenience" for employees.) But she became tired of being charged $1.75, in addition to the A.T.M.'s fees, to withdraw cash. After a tip from a co-worker, Ms. McLemore realized she could reduce her charges if she took out all her wages once a month. Now, supplied with one of the most modern banking products, Ms. McLemore has a decidedly old-fashioned way of handling her wages: they are stacked in a shoe box in her closet in $10s and $20s.

"It costs too much to get my money," she said.

[Admiral Yi]

Today's "Let's call boneheads who are too lazy or stupid to sign up for direct deposit victims of the greatest crime since slavery" thread.

[CountDeMoney]

Today's "Let's call boneheads who are too lazy or stupid to sign up for direct deposit victims of the greatest crime since slavery" thread.

Didn't think you were in the Nanny State camp, what with telling people how and what to do with their money.  That's so not Romnyi of you.

[garbon]

This article seems a little ridiculous...and overly vague on how many people are actually in systems (with their employers) where they can only get their money on a card that may be for a bank with few branches in their area.

[Admiral Yi]

Didn't think you were in the Nanny State camp, what with telling people how and what to do with their money.  That's so not Romnyi of you.

WTF?  Letting people make their own choices and live with the repercussions is Nanny State?  A Nanny Stater would ban payroll cards because stupid people use them stupidly.

[Berkut]

I love reporting like this:

Problems arise, though, when employers mandate the use of prepaid cards. In 25 states, employers are allowed to forgo paper checks and offer direct deposit or payroll cards; in the remaining states, regulations are less clear and employers are taking a risk by not offering a paper-check option, too, according to research by Madeline K. Aufseeser, an analyst at Aite. It is unclear how many employers offer payroll cards.

They state "empoyers mandate..." then go on the say that they...cannot mandate their use. Awesome.

[CountDeMoney]

WTF?  Letting people make their own choices and live with the repercussions is Nanny State?  A Nanny Stater would ban payroll cards because stupid people use them stupidly.

I know you're a big fan of the banking industry and squeal with delight when they assbang lower income earners with fees when they can't maintain their minimum balance requirement, but I didn't think you'd go so far as to think banking is as mandatory to the working poor as forcing them to pay for Photo IDs to vote. 

Shame on you.  Shame, shame. 

[The Brain]

Of all the schticks in all the world you had to pick Communist.

[CountDeMoney]

Save it, Bestiality Boy.  Leviticus is a much older schtick.

[Admiral Yi]

I know you're a big fan of the banking industry and squeal with delight when they assbang lower income earners with fees when they can't maintain their minimum balance requirement, but I didn't think you'd go so far as to think banking is as mandatory to the working poor as forcing them to pay for Photo IDs to vote. 

Shame on you.  Shame, shame. 

What happened to our discussion about the Nanny State?  I was enjoying that a lot, but it seems to don't want to talk about that any more. 

[CountDeMoney]

What happened to our discussion about the Nanny State?  I was enjoying that a lot, but it seems to don't want to talk about that any more. 

Nanny State away, baby.  I'm chock full of heady Shumer goodness today.

[Admiral Yi]

Nanny State away, baby.  I'm chock full of heady Shumer goodness today.

Ball's in your court.  You called me a Nanny Stater for subscribing to a position that's the exact opposite of Nanny Statism.

[CountDeMoney]

Ball's in your court.  You called me a Nanny Stater for subscribing to a position that's the exact opposite of Nanny Statism.

Perhaps Nanny Stater was too harsh, despite telling people what they should do with their money.  Hypocrite and full of shit is probably more appropriate.

[Eddie Teach]

Big Brother Corp and Big Brother Government aren't the same thing.

[Admiral Yi]

Perhaps Nanny Stater was too harsh, despite telling people what they should do with their money.  Hypocrite and full of shit is probably more appropriate.

I'm not telling anyone what to do with their money.  If some idiot wants to get a pay card instead of writing down two numbers to set up direct deposit, then wants to print out five statements a month and withdraw $10 a time from an ATM that charges a fee because the one that doesn't charge a fee is "not convenient," I say more power to him.  Knock yourself out.

You're the one that's full to the brim with shit.  You can't just say 1 + 1 = 3 then explode in super-retarded indignation when you get called on it.  Or I suppose you can, but there are too many people that already know what 1 plus 1 equals for that con to work.