PYMNTS-MonitorEdge-May-2024

NY Labor Department Finds Payroll Card Regulation Victory

Payroll cards have faced quite a bit of controversy in recent years.

While the tool can bridge under-banked employees to a digital, efficient and timely way of receiving wages, critics have also shone a spotlight on hidden, excessive fees that can sometimes accompany payroll cards.

That criticism has, in several cases, also led to legal action. Most recently, the state of New York’s Department of Labor (DOL) secured a legal win in its fight against unfair payroll card practices.

Reports in the National Law Review said this week that a New York appellate court has upheld a previous court’s ruling in favor of the DOL, which had faced a legal challenge from payroll card company Global Cash Card.

It’s a case that stems back several years with several court rulings. The DOL first issued proposed rules in 2016 designed to safeguard employees who receive compensation via payroll cards, with requirements for employers to ensure payroll card products offer at least one ATM “within a reasonable travel distance to the employee’s work location or home” that does not charge withdrawal fees.

Additional requirements focus on transparency in payroll card rules, as well as a ban on connecting payroll cards to any form of credit, including payday loans.

A Legal Debate

At the time it first proposed the rules, the DOL received praise from employee rights advocates.

“We think these rules will go a long way in addressing the issues we’ve been hearing about from low-wage workers,” said New Economy Project Co-Director Deyanira Del Río in 2016.

But the proposed requirements also led to criticism, most notably from Global Cash Card, which accused the DOL of overstepping its jurisdictional boundaries by establishing the rules. In 2017, the New York State Industrial Board of Appeals agreed, ruling that “the regulations are invalid because they exceed rulemaking authority.”

The DOL appealed that ruling, however, with the legal saga reaching the New York Supreme Court, which sided with the DOL.

These rules have been in effect throughout Global Cash Card’s appeal of the regulations, however with the appellate court’s most recent ruling, reports said the DOL will begin enforcing these requirements. It’s unclear whether Global Cash Card will appeal this decision.

New York isn’t the only legal battleground in the payroll card industry.

In 2017, McDonald’s franchise owners in Pennsylvania settled a lawsuit accusing them of unfair use of payroll cards with fees; and in 2018, a temp worker at Tesla filed legal action against their staffing agency, Balance Staffing, accusing the company of pressuring workers to receive wages via payroll card instead of paychecks.

In Other Commercial Card News

Payroll cards were also the focus of recent mergers and acquisitions (M&A) activity. Earlier this month, Edenred announced the acquisition of the United Arab Emirates (UAE) payroll card portfolio of Mint. Reports at the time said Mint is currently the second-largest provider of pay distribution and management services for under-banked employees, pointing to the role of payroll cards in providing financial services for these professionals.

In a statement, Edenred Europe, Middle East and Africa Chief Operating Officer Arnaud Erulin said the company’s acquisition of the payroll card portfolio will support its existing mobile app, “improving the daily lives” of UAE workers.

But payroll cards aren’t the only commercial card tool at the center of financial services players’ initiatives to do good.

This week, spend management solution provider Expensify announced the launch of a new corporate card initiative, Karma Points, which enables businesses using Expensify commercial card products to automatically initiate a charitable donation from Expensify.

The company said it will donate 10 percent of revenue from its Expensify Card operations to combat homelessness, child hunger, climate change and other causes.

In a statement, Expensify Founder and CEO David Barrett said while rewards programs from commercial cards only generate “pennies on the dollar — or fractions of pennies,” the combination of all of the rewards revenue can be significant.

PYMNTS-MonitorEdge-May-2024