Consumer, worker advocates praise N.Y. AG for investigation into prepaid cards

By Jessica M. Karmasek | Jul 8, 2013

NEW YORK (Legal Newsline) -- The National Consumers League, one of the nation's leading consumer and worker advocacy groups, says New York Attorney General Eric Schneiderman is right to launch an investigation into retailers that use prepaid cards to pay their employees.

Last week, sources told the New York Times that Schneiderman has sent letters to about 20 employers that allegedly are using ATM-like cards to pay their hourly employees.

Among the businesses being investigated are retail giants Walmart, McDonald's, Home Depot and Walgreen's.

The NCL, in a statement last week, called the use of such cards "outrageous."

"Most of these employees are not paid a livable wage; the last thing they need is the additional burden of onerous fees further reducing their already meager wages," NCL Executive Director Sally Greenberg said Wednesday.

"The NCL encourages attorneys general in other states to follow Mr. Schneiderman's lead."

The attorney general's investigation will examine the three ways in which these companies pay their employees: paper check, direct deposit and prepaid cards.

Under New York state law, employees must give their consent to be paid by payroll cards, and acceptance of this form of payment cannot be a condition of employment.

However, there are many additional fees associated with the use of such cards, including withdrawal fees, replacement fees, inactivity fees and a fee for requesting a paper statement.

According to the Federal Reserve, the prepaid card is the fastest growing non-cash method of payment.

Banks are eager to partner with businesses that use the cards because of the fees associated with them.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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