Authored by: Cynthia L. Effinger
Yes, you should proceed with caution and review the Consumer Financial Protection Bureau's ("CFPB") bulletin No.2013-10. Kentucky state law allows employers to require direct deposit at a financial institution so long as employees have the ability to withdraw their entire net pay without having to pay a fee to the financial institution. Federal law, however, prohibits employers from doing the same with payroll cards. Payroll cards can be an alternative to receiving direct deposit, but employers must ensure they are compliant with federal law - specifically, the Electronic Fund Transfer Act and Regulation E. The CFPB's bulletin, issued in September 2013, detailed important consumer protections with which employers and financial institutions must comply if providing wages via payroll cards. These protections include the right to fee disclosures, assess to account history, limited liability for unauthorized transfers and error resolution rights.