Effective April 1, 2018, employers who use pay cards as a method to pay their employees will be subject to new compliance standards. These can be boiled down into two new requirements:
- Providing two separate disclosures to employees BEFORE they enroll in the pay card program. If advertising for your pay card program is provided in a language other than English, these disclosures should also be provided in that foreign language.
- Offering employees at least one additional payment method in addition to pay cards. Alternatives can include paper checks, direct deposit, or some other payment method.
Disclosures. There’s a “short form”, which highlights fees and information about the prepaid card account, and must be presented in a specified format. Then there’s a “long form” which provides more detailed information. Both versions need to be provided to employees considering pay cards as a payment method.
Method of Delivery. How you provide the disclosures to employees depends on the manner in which they enroll in their payment method. If you enroll employees face-to-face, then provide the disclosures in paper format. If you enroll employees by phone, the regulations require that you read the disclosures to them over the phone. And if you enroll employees online, the disclosures can be provided electronically.
Timing. These disclosures must be provided to employees before they enroll in the pay card program.
Remember that your state may have additional compliance requirements for paying with pay cards and/or direct deposit, so be aware of those rules as well. For instance, many states require that employees be able to receive their pay without additional fees.
Your pay card provider should be able to assist you with these new regulations, but the ultimate responsibility lies with you as the employer.
For more information, visit the Consumer Finance Protection Bureau (CFPB) website at: https://www.consumerfinance.gov/policy-compliance/guidance/implementation-guidance/prepaid-rule/.