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Debit cards often involve high fees and limited access.  For consumers, these problems are compounded when their employers use debit cards or “payroll cards,” instead of checks, to pay their wages.

According to the Consumer Financial Protection Bureau, employees have a choice.  They can be paid by debit card or an alternative method.  Employers must offer at least one other method — a traditional check, direct deposit, or cash, for example.  Employees who choose a debit card should be careful about the following problems.

First, be wary of any card that has hidden fees.  The law requires that any fee for transfer of funds to or from the card must be disclosed in writing.  The employer must give this written disclosure to the employee.

Second, employers must provide employees with access to account information.  For example, the balance on the card must be available by telephone.   And, if requested by the employee, a 60 day account history (including all fees and fund transfers) must be made available to the employee in writing.

Third, as with a credit, the employee’s liability must be limited if the card is lost or stolen.  If, after an unauthorized use occurs following loss of the card, the employee report loss.  If she does so, her liability is limited to the lesser of $50 or the amount of the unauthorized transfer.

Finally, financial institutions must respond to a consumer’s report of errors.  Generally, the consumer has a duty to report the error within 60 days of accessing the account or 120 days after the error occurs.

According to the American Payroll Association, best practices for employers who pay their employees with debit cards include:

  • using a card that is widely accepted
  • providing clear information about fees
  • training employees on how best to use the debit card
  • allowing employees to access their full wages in cash, with no fee, at least once a pay period.

Clark Perdue is currently investigating claims of employees who have been paid by debit card and have been charged excessive fees.  If you would like more information, please contact us.