New York Attorney General Investigating Walmart, Home Depot, Others Over Prepaid Payroll Cards

Though it’s been a point of concern with employee-rights advocates for years, the use of prepaid debit cards as a substitute for traditional payroll checks is finally getting attention from the powers that be, with the New York state attorney general’s office investigating the practice at some of the nation’s largest employers.

Bloomberg reports that NY AG Eric Schneiderman’s team is looking at whether or not companies like Walmart, Home Depot, Time Warner Cable, Walgreens, Costco, and Darden Restaurants (parent company of Olive Garden, Red Lobster, and LongHorn Steakhouse), may have gone too far in pushing workers to accept their wages on prepaid debit cards that often have a variety of fees that can eat away at an employee’s pay.

“We are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees’ take-home pay,” reads a letter from Schneiderman’s office to the companies involved in the investigation.

The AG is asking the companies to show that their use of prepaid payroll cards complies with New York state labor law, which says that employees must provide written consent to be part of a prepaid payroll card program, and that the employer can’t make participation in the program a condition of employment.

Schneiderman is also requesting a summary report of fees associated with these cards, along with copies of the fee-disclosure documents that are given to the employees.

“Employees must have a method to obtain all of their wages in a timely manner, without incurring fees,” reads the letter.

In the Pennsylvania lawsuit that has brought this issue out into the spotlight, a former McDonald’s worker says she was forced to accept her wages on a prepaid debit card and that the owners of her franchise refused her requests to have her pay direct-deposited into her account.

Earlier this week, the franchisees in that case changed their policy to give employees the option of getting paid in more traditional forms.

As we’ve pointed out before, a growing number of employers are switching to prepaid payroll cards because they cost less and don’t require some of the hassles involved in providing paychecks or direct deposit. And some of the country’s biggest banks — like JPMorgan Chase and Wells Fargo — are eager to service these largely unregulated cards, as they can earn a significant amount of money from the fees.

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