The years-long endeavor in New York State to extensively regulate payroll cards (referred to in the NY regulations as “payroll debit cards”) recently entered a new phase when the New York State Supreme Court, Albany County, annulled the New York State Industrial Board of Appeals’ (“IBA”) February 2017 decision to revoke new payroll card regulations that had previously been issued in that state. This means that, depending on the outcome of the recently filed appeal of the court’s decision, the controversial and highly restrictive NY payroll card regulations could become effective after all.
Payroll cards are prepaid cards that employers use to pay wages to their employees. Such cards are already subject to certain employee protections under the federal Electronic Fund Transfer Act (Regulation E), and many states have also issued local laws governing such products. In 2016, the New York State Department of Labor (“NYDOL”) adopted regulations under New York’s labor law setting forth several new requirements for payroll cards, including steep restrictions on fees. Employers must ensure that employees can make withdrawals at no cost from at least one ATM that is within a “reasonable travel distance” from the employee’s home or work location. In addition, the NYDOL’s regulations prohibit fees for (among other things) maintenance, point of sale transactions, overdrafts, account inactivity and ATM use to retrieve balance information. One provision also requires that employers obtain written consent from employees at least seven business days prior to issuing the cards to the employees.
The NYDOL’s regulations had initially been revoked as the result of a petition filed by Global Cash Card, Inc., a company that issues payroll cards in New York, on the ground that the NYDOL’s prohibition on fees for banking services exceeded the agency’s regulatory authority. However, the New York State Supreme Court annulled the IBA’s decision as being “arbitrary and capricious.” While we wait to see the outcome of the pending appeal, many employers, banks and program managers will need to analyze their payroll card programs in New York State in light of the NYDOL’s regulations.