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Great reporting in the New York Times today from Jessica Silver-Greenberg and Stephanie Clifford about an increasingly annoying, not to mention inherently immoral, problem faced by the lowest income American workers.
In an effort to save money, many businesses with lower paid workers, such as fast food franchises and retail chains, are resorting to paying workers with prepaid debit cards that often come with extremely hefty fees (like $1.75 each time you make a withdrawal at an ATM or a $7 penalty for not spending your own money before a specified date). Just getting a regular check or direct deposit at a bank isn’t even an option anymore for some workers, as well as many people on public assistance programs. Some states, like California, put unemployment insurance benefits on prepaid ATM cards subject to these sorts of fees also.
As Silver-Greenberg and Clifford point out, these charges just to get at your own money can often be so onerous as to mean that the workers who are paid this way end up making less than the minimum wage. As an increasing number of consumer attorneys, state and Federal regulators and of course the workers themselves are starting to realize, these “fees,” to put it in plainer English, amount to legal confiscation:
Taco Bell, Walgreen and Wal-Mart are among the dozens of well-known companies that offer prepaid cards to their workers; the cards are particularly popular with retailers and restaurants. And they are quickly gaining momentum. In 2012, $34 billion was loaded onto 4.6 million active payroll cards, according to the research firm Aite Group. Aite said it expected that to reach $68.9 billion and 10.8 million cards by 2017.
Companies and card issuers, which include Bank of America, Wells Fargo and Citigroup, say the cards are cheaper and more efficient than checks — a calculator on Visa’s Web site estimates that a company with 500 workers could save $21,000 a year by switching from checks to payroll cards. On its Web site, Citigroup trumpets how the cards “guarantee pay on time to all employees.”
GOOD TIMES! And hey, now that $21,000 AND THEN SOME can get pushed onto the worker’s backs and off the corporation’s bottom line! You have to wonder if Taco Bell, Walgreens and Wal-Mart are skimming micro-payment kickbacks every time one of these cards is swiped. It’s one thing for a company with 500 employees, imagine the kinds of “arrangements” that are in place between the big banks and these mega-corporations.
Many low income Americans do not have bank accounts at all, but the “innovation” of the payroll ATM cards effectively allows the big banks to pick their pockets anyway, applying a surcharge—let’s call it a “Capitalist free market tax” shall we?—to give people access to their own money. In poorer rural communities where the only ATMs might be in a mini-mart or liquor store, the fees would also be charged by the ATM provider (and split with the owner of the store). All in all, you gotta hand it to them, it’s a damned clever, if outrageously morally reprehensible, way for the banks to make up for all those various gravy-trains that the Dodd-Frank legislation effectively ended:
For banks that are looking to recoup billions of dollars in lost income from a spate of recent limits on debit and credit card fees, issuing payroll cards can be lucrative — the products were largely untouched by recent financial regulations. As a result, some of the nation’s largest banks are expanding into the business, banking analysts say.
The lack of regulation in the payroll card market, while alluring for some of the issuers, can potentially leave cardholders swimming in fees. Take the example of inactivity fees that penalize customers for infrequently using their cards. The Federal Reserve has banned such fees for credit and debit cards, but no protections exist on prepaid cards. Cards used by more than two dozen major retailers have inactivity fees of $7 or more, according to a review of agreements.
Some employees can also be hit with $25 overdraft fees, called “balance protection,” on some of the prepaid cards. Under the Dodd-Frank financial overhaul law, banks with more than $10 billion in assets are barred from levying overdraft fees on customers’ checking accounts.
That’s great if you’ve got enough money to actually put into a checking account, but if you’re already waking up every morning on the wrong side of capitalism, these vampires can legally bleed you dry and clearly have every intention of just taking whatever they can.