PURCHASE, N.Y. — MasterCard has set new standards for its payroll cards, and says it says should help employees take better advantage of its benefits.
Payroll cards, which are similar to debit cards, are a means for an employer to pay employees. They typically are used as a way to deposit paychecks for workers who do not have access to a traditional checking account.
The cards have stirred controversy. Proponents say they are the equivalent of cash or checks and give people access to funds in a fashion they can easily use. But critics point to fees to use the cards as a burden on low-wage workers who receive them as payment.
The Consumer Financial Protection Bureau issued a warning to employers about such cards in September based on complaints about fees. And the New York Attorney General’s office began looking into about 20 companies for use of such cards to pay employees to ensure they comply with consumer-protection laws.
MasterCard said Friday that its new standards will require employers to offer cardholders greater insight on the cards through educational resources and increased transparency of any fees. It says the standards ensure the employee has a fee-free way to access their pay and check available balances.
Payroll cardholders can access their full pay for free at least once per pay period under the new standards and employees will have a choice of how they are paid — by card, direct deposit or other means — as required by law.
“Payroll cards serve as one way to bring the traditionally underserved into the financial mainstream,” Ron Hynes, group executive of Global Prepaid Solutions at MasterCard, said in a statement. “These standards will help ensure that employees not only understand the choices available, but allow them to take advantage of benefits like direct deposit, online shopping and bill payment that have not been traditionally available to them.”
All new MasterCard payroll card programs will need to meet these standards as of July 1 and existing programs will have until Oct. 1, 2014 to make any necessary adjustments.