California Seeks to Regulate Payroll Cards
California’s small businesses and other employers may have to meet a host of conditions before they are able to pay their employees with a payroll card.
Under California Senate Bill 931, an employer would be required to give the employee the option of receiving wages by direct deposit to a depository account of the employee’s choosing, paper check, or payroll card, according to Morrison Foerster LLP, a law firm tracking the legislation.
Employees must also provide written consent to receive wages by payroll card. The employer cannot make participation in the card program a condition of being hired.
The payroll card account would also have to provide deposit insurance for the employee, on a pass-through basis, from the FDIC or the NCUA, according to the bill.
If the bill is enacted, employees would not be charged fees for application, initiation, loading or participation.
According to Morrison Foerster, the bill would amend sections 215 and 225.5 of the California Labor Code. It was scheduled to be presented to Gov. Jerry Brown for his signature by Oct. 9.
Over the past few years, several CUSOs have entered the payroll card market including The Members Group’s ATIRApay program and Innovative Card Services, a CUSO of the $245 million Inova Credit Union in Elkhart, Ind.