New York’s New Payroll Law Ensures Employee Wages Aren’t Subjected to Hidden Fees
Why does it cost so much to access your money at an ATM? The short answer: because you don’t have another option. ATMs are everywhere – NerdWallet reported about 175,000 bank and credit union ATMs nationwide – because they’re functional. Between credit cards, debit cards, and apps like PayPal and Venmo, it’s easy to get by without cash these days. But when you do need to get cash (good luck tipping a bartender with Venmo), the ATM fees will get you.
Unfortunately for the public, the average ATM transaction fee is $4.52, a $2.77 increase since 2007. To rub a little salt in the wound, the vast majority of ATM fees go straight into the pockets of the same “Big Four” banks that contributed to the 2010 foreclosure crisis.
For many people, avoiding transaction fees at the ATM is simple: get cash back at a store. Better yet, leave your bank for a credit union. You won’t be alone – 3.7 million Americans joined credit unions last year. Not only do credit unions offer lower fees and more personalized service than banks, most of them offer fee-free access to the largest ATM networks in the country.
There’s just one problem: what if the reason you’re using an ATM isn’t to access money in a bank account? For anyone who cannot maintain minimum balances or afford bank fees, ATMs still come in handy. For example, some states use cards that rely on ATMs to disburse government assistance like food and cash benefits. Unfortunately, the system comes with a price to those who use it. In 2012, Californians paid $19 million in fees just to access their benefits. What kind of investment in struggling families includes a $19 million tip to big banks?
In recent years, many workers without bank accounts have been using ATMs to access their pay using payroll debit cards. Payroll debit cards offer benefits to both employer and employee. For workers, pay is available immediately and never necessitates a special trip to retrieve a paycheck. It’s also safer than cash payments, and workers without a bank account don’t have to pay exorbitant fees to check cashing businesses. For employers, the cards are attractive because they cut out the costs of paper payroll and paycheck systems. The problem with payroll debit cards is that ATM fees can effectively drop wages below minimum wage requirements.
In New York, where an estimated 200,000 workers receive their pay through debit cards, regulators have paid special attention to the issue. Here are some of the new rules – intended to protect low-income workers – that go into effect in four months (the full list is available here):
- Employers must provide a description of payment options
- Employers may not require payment through payroll debit card
- Employers must provide a list of accessible, fee-free ATMS
What are your thoughts on this? Leave a comment in the comments section below.