A petition and complaint from a Pennsylvania credit union member has helped launch increased regulatory interest in re-loadable prepaid cards that are being used to pay employees.
Natalie Gunshannon, a resident of Dallas Township, Pennsylvania, began a petition on change.org urging her then-employer, a local McDonald's franchise owner, to pay her through direct deposit to her credit union account and not by direct deposit onto a payroll card issued by JP Morgan Chase.
The card carried significant fees to access her money, Gunshannon complained. She noted that her credit union account and its debit card did not carry fees.
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"These cards come with a lot of fees; from fees for cash withdrawals to balance inquiries to lost or stolen cards to overdrafts and even inactivity fees," Gunshannon wrote in the petition. "The federal government has helped reduce fees on credit and debit cards that most consumers use, but those protections don't apply to the kinds of cards companies like McDonald's are using to pay employees. In the end, I feared that once all of the fees from getting my own hard-earned wages through this card were taken out, my pay would go below minimum wage."
Gunshannon said she is a member of Service 1st Federal Credit Union, a 22,000-member, $219 million credit union headquartered in Danville, Pa., that she joined about 15 years ago because her mother was a member.
Gunshannon wrote that she left the McDonald's "not because I didn't like the people but because I think it's only fair I get paid for all of my work there."
Gunshannon's addressed the petition to the CEO of McDonald's and other McDonald's executives. The petition reached its 300,000 goal on July 22, but has been left on the site with a goal of an additional 200,000 signatures.
Re-loadable cards that accept directly deposited wages have been one of the fastest growing segments of the prepaid card industry as employers and financial institutions sought ways to use ACH as the predominant means of payment.
Employees with deposit accounts at financial institutions are relatively easily moved away from checks, but employees without such accounts used to have to get paychecks, which are both more expensive for the employer and considered dangerous for the employee because it left them holding large amounts of cash. Re-loadable cards, dubbed payroll cards, were offered as mechanism to improve the situation for both employers and employees.
Gunshannon has filed a class action lawsuit against the franchise owners, the Albert and Carol Mueller LP, and the company has abandoned the practice. The partnership owns 16 McDonalds restaurants in Northeastern Pennsylvania and issued a statement.
"An important part of our value system has always been to provide our employees with convenient, free and immediate access to their pay," Christina Mueller-Curran, spokeswoman for the franchisee, said in a statement."By expanding the options our employees have to receive their wages they will be better able to meet their individual financial needs and preferences."
Despite the change in policy, Gunshannon said the petition will continue because said the practice of both forcing employees to accept payment through payroll cards and then charging fees for the cards appears to be spreading, in her view. She wrote that she has heard of employees of McDonald's franchises as far away as Milwaukee have been facing similar issues.
Meanwhile, the complaint and litigation had drawn the attention of state officials and federal legislators.
New York Attorney General Eric Schneiderman has launched an investigation into how large employers are paying hourly employees with payroll cards and has sent letters inquiring about their policies to 20 large employers in the state, according to the business consulting firm Ballard Spahr.
The firm reported that Schneiderman is concerned that the card's fees might not be fully disclosed or excessive.
The attorney general's office declined to comment on the report.
In addition, sixteen U.S. Senators, all Democrats, have written the CFPB and Department of Labor asking the agencies to investigate whether the use of high fee payroll cards, after fees, prevents lower income workers from making a minimum wage. The legislators also asked Cordray look into whether some employers have been getting paid for the numbers of employees that they steer onto the cards.
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