The debit-card method for paying retail employees—something that has already brought a lawsuit and a New York state Attorney General probe into chains including Walmart (NYSE:WMT), Walgreens (NYSE:WAG) and McDonald's (NYSE:MCD)—has gotten the attention of 16 U.S. Senators, who have asked regulators to investigate.
In a letter on Thursday (July 11), the senators urged Richard Cordray, the director of the Consumer Financial Protection Bureau, and Seth D. Harris, the acting secretary of the Labor Department, to "take swift action to protect American workers," according to The New York Times.
The issue is that these hourly workers are often paying bank fees that significantly cut into their already-low takehome pay. But there's another side to this problem, which is that these workers sometimes have no bank accounts, pushing them to check-cashing services, who charge even higher fees. In short, a program intended to save workers money by giving them a lower-cost alternative to check-cashing stores has generated its own problems.
Another issue is that these workers are often unaware of the existence of non-debit-card-like options from their employers. They also find that switching from one payment method to another can be difficult. Like so many other retail issues, this one can likely be mitigated through easier and more flexible systems and better associate training (so they understand their options better before they make those payroll choices).
There are only practical problems with the debit-card program. "Worried about drawing unwanted scrutiny that might threaten their jobs, some employees say they are reluctant to request another option," the NY Times story reported. "Other employees say that while there is a choice, they are automatically enrolled in the payroll-card programs."
The senators, including Richard J. Durbin of Illinois, Charles E. Schumer of New York, Elizabeth Warren of Massachusetts and Joe Manchin III of West Virginia, asked the regulators to examine whether workers understood the fees associated with the cards. The lawmakers also asked the Consumer Financial Protection Bureau to make a systematic study of the fees, according to the letter.
Employees "should have the right not to use such a card and to instead receive their pay via a paper check or direct deposit," the letter said.
- See The New York Times story
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