The potential perils of payroll cards

To the editor:

I’ve read articles published recently in NHBR on the topic of payroll cards. Like most, I was unaware of the trend because this payment method was never offered to me.

Serving on the House Labor and Industrial Relations Committee, I was introduced to payroll cards with Senate Bill 100, a bill to remove the requirement to offer a paper check option. We learned about the savings for employers, but also about the fees employees incur when checking their balance, or by accessing their funds a second or third time during the pay period. There are fees for inactivity, declined transactions, and in some cases overdrafts, which allow loans against the next week’s pay – for a $25 fee.

The payroll card providers say they are offering convenience and lower costs for unbanked workers. These are typically the low-wage earners who understandably can’t maintain minimum balances in traditional bank accounts. They may pay $7 to cash a check, so used carefully, payroll cards may be a viable alternative, although not the best.

A credit union will open an account with as low as a $5 initial deposit and require no minimum balance thereafter. With this option, nearly everyone could have direct deposit, and at no cost. The employee can choose to have a debit card on the terms of that institution – not the payroll card seller.

I wondered why employers could not discuss the cost of payroll and the savings resulting from direct deposit with their employees. Why couldn’t they offer information about local banks and credit unions for their employees to consider?

SB 100 was rejected by the House. This year, I sponsored House Bill 1404, which would limit the excessive fees associated with payroll cards. Overdrafts would not be permitted. The cardholder would have three withdrawals per pay period, with no fees for balance inquiry, declined transaction, low balance or account inactivity.

These are measures meant to protect the employee and let them keep more of their earnings to spend here in New Hampshire. The transaction fees paid by merchants when swiping the cards should be an adequate reward for the card providers, and if not, this may not be a good business model.

The Senate Commerce Committee has placed HB 1404 in interim study, where it may be amended or die quietly. I believe this is a reasonable bill that offers protections that are needed for our most vulnerable workers. New Hampshire employers have not embraced these cards because they value their employees and find mutually beneficial solutions to payroll costs.

Rep. Michael Cahill

D-Newmarket