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Opinion: Help workers avoid predatory check-cashing services

If there is any sense of fair play in Senate Bill 931, it can be found only in the fact that it creates needless problems for both the employer and the employee regarding the use of payroll cards.

Payroll cards have been working very well for employers and employees alike, but now lawmakers in Sacramento voted to effectively kill them – unless Governor Jerry Brown prudently exercises his veto authority.

Currently in California, employees may choose to have their paychecks electronically loaded to prepaid payroll cards at no charge. For many reasons, this is a popular option for workers who don’t have a checking account or traditional banking relationship, but especially because it allows them to avoid the alternative of predatory check cashing services.

SB 931 was recently amended to impose severe restrictions on the use of payroll cards in California. As amended, SB 931 goes far beyond ensuring that employees have full access to their wages each pay period. The bill would also require employers provide a number of free banking services to their employees – including making employers or banks cover the cost of multiple bank transactions, point of sale transactions, and additional paper periodic statements.

We agree that employees should have full access to their wages, that makes sense, but these types of requirements are not imposed upon any other method of wage payment, including payroll checks. They are so cost prohibitive that issuers and employers are likely to stop offering this beneficial wage payment method to employees in California.

Indeed, the San Francisco Chronicle reported that José Cisneros, the San Francisco treasurer, warned that these requirements “could have a ‘chilling effect’ on issuance of the cards…Cisneros worried that a retreat from payroll cards would push many vulnerable workers back into ‘fringe financial services,’” prompting the Chronicle Editorial Board to ask, is “this a case of a measure designed to help the working poor having the unintended effect of working against them?”

We share the concerns that SB 931 would hurt the very people it seeks to protect by establishing a de facto ban on payroll cards. One of the largest benefits of these payroll cards is that they are an alternative to predatory check cashing and payday lending outlets for many low-income workers who, for a variety of reasons, do not or cannot open a traditional checking account.

Moreover, the sponsors of SB 931 have failed to show a need for increased regulation of payroll cards. To the contrary, studies have repeatedly shown that payroll cards are one of the least expensive and safest ways for employees to receive their wages.

It’s also worth noting that state law currently requires that each employee opt-in to receive wages on payroll cards, that choice cannot be mandated by the employer. If some employees have been denied full access to their wages, as the sponsors suggest, the problem lies with lack of enforcement of the current statutory provisions, not the provisions themselves.

Let’s be clear: we support the ability of employers to compensate their employees using electronic methods, including payroll cards. And we support restrictions, consistent with the Labor Code, that ensure employees are provided with full and free access to their wages.

But SB 931 goes well beyond that. It overreaches and goes well beyond what is necessary. It is unreasonable, unnecessary and will make it unlikely that employers and issuers will offer this alternative form of wage payment in California. SB 931 deserves be vetoed by Governor Brown.

Ed’s Note: Julian Canete is the President and CEO of the California Hispanic Chambers of Commerce.


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