In September, we told you about an effort in the state of New York that would have tightened regulations on prepaid payroll cards. Now, six months later, these efforts have been struck down by a review board.

Quick review: What is a payroll card?

To put simply, a payroll card is a type of bank debit card. It’s a way for employees to receive and use their payroll wages. Once pay is deposited into a payroll card account, employees can use this card the same way they use a debit card.

Users can withdraw earnings from an ATM or cash-back purchases. Typically, payroll cards are used by hourly workers without a checking account.

Here’s what happened:

The new rules (which were supposed to take effect this month) were aimed to ensure employees who receive wages on a payroll card would not have to pay fees to access their pay. The regulations put forth by the New York State Labor Department (NYSDOL) also required employers to provide workers with access to at least one local ATM that doesn’t have fees and is near their home or work.

The new rules would have forbidden other fees such as charges for maintenance, account inactivity or overdrafts, checking a card’s balance and for contacting customer service.

The New York State Industrial Board of Appeals ruled that the regulations were “invalid” because the NYSDOL exceeded rulemaking authority by straying into the regulation of banking services. The board noted that of the last eight bills introduced in New York that apply to payroll cards, none have been enacted.

Only a body with authority over financial services such as the State Legislature can issue new regulations, according to the board. However, they did not deny that these payroll cards can be problematic, calling it a “well-founded concern.”

The NYSDOL has 60 days to appeal the board’s decision.

Avoid legal implications when using a payroll card

Reach out to us! If you have employees who might need to use a payroll card, we’ve got you covered. PrimePay’s Paycard has many beneficial features and our team will be able to answer any questions you may have. 

Disclaimer: Please note that this is not all inclusive. Our guidance is designed only to give general information on the issues actually covered. It is not intended to be a comprehensive summary of all laws which may be applicable to your situation, treat exhaustively the subjects covered, provide legal advice, or render a legal opinion.  Consult your own legal advisor regarding specific application of the information to your own plan.