New York's attorney general has ordered some 20 major employers in the state—including Walmart (NYSE:WMT), Walgreens (NYSE:WAG) and McDonald's (NYSE:MCD)—to turn over information about their use of prepaid debit cards to pay employees, The New York Times reported on Wednesday (July 3).
The information demanded by New York attorney general Eric Schneiderman includes documentation proving that employees have given explicit consent before being issued their pay using the cards, as required by state law. New York law also requires that employees have an option for getting their wages without having any additional fees. The prepaid debit cards can generate fees ranging from 50 cents to check a balance at an ATM to $2.25 or more for a withdrawal from an out-of-network ATM.
The AG's office is also investigating fee schedules, whether the fees have been fully disclosed to employees, and exactly how much in fees has been paid, The Times reported, citing sources that the newspaper did not name.
A Walgreens spokesperson, James W. Graham, said the chain offered payroll debit cards as one of several options, adding that Walgreens "created a payroll card program for our employees with the specific intention of providing terms as favorable to our employees as possible, if they choose to be paid that way." Walmart said previously that it lets employees choose between direct deposit and a prepaid card.
McDonald's didn't comment. A McDonald's franchisee in Pennsylvania has been sued by a former employee over the franchisee's use of payroll debit cards.
Some employers and card issuers argue that the card fees are usually lower than those charged by check-cashing services, and are thus the least expensive option for low-wage workers who don't have bank accounts. They also say there are free ways for employees to gain access to their pay.
Whether that will satisfy the New York AG has yet to be seen. But presuming retailers aren't getting a cut of those fees, it seems as if these large chains should be able to come up with a workaround to the fee problem. That might mean the retailer cutting special fee-free deals to use nearby ATMs, or reimbursing the fees (messiest of the options), or simply letting employees cash their payroll cards at the store's point of sale.
This isn't rocket science, it's controlling the costs of payment cards—and that's something big chains do have down to a science.
- See this New York Times story
McDonald's Franchisee Reverses On Forcing Employees To Be Paid Via Debit Cards
Is McDonald's—Or Maybe One Of Its Franchisees—Getting Too Clever About How To Pay Wages?