B2B Payments

Connecticut Learns From NY's Payroll Card Strifes

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Weeks after New York state introduced new legislation aimed at protecting employees from excessive fees while using their payroll cards, a neighboring state is gearing up for its own laws targeted at the tool.

Reports on Wednesday (Sept. 28) said Connecticut is preparing for a new statute to legalize payroll cards. The statute comes into effect Oct. 1 and, reports said, aims to offer employees the benefits of payroll cards, while learning from other states' challenges surrounding them.

"I think it's a win-win for everyone," said Ogletree, Deakins, Nash, Smoak & Stewart office managing shareholder Marc Zaken. "Companies are moving in this direction because of a savings in cost. Employers save money, and employees save money. It's very convenient."

The biggest cost savings for employers, he said, are the shift away from paper checks. According to Zaken, it can cost an average of $2–$2.50 to cut each check, while uploading funds to a payroll card costs about $0.50.

Despite the cost savings for employers, payroll cards have received a negative reputation in some states for the fees imposed on employees when they use their card or look to withdraw funds from ATMs. According to reports, Connecticut rules aim to address those drawbacks; the state bans employers from imposing additional costs on employees for using the cards, while any payroll card an employer decides to use must be linked with a "substantial number" of ATMs that don't charge fees.

Connecticut is also ensuring that, while payroll cards can expire, the funds loaded onto them cannot, and lost cards can be replaced once a year when an employee makes such a request.

"I think the Connecticut statute closes a lot of the loopholes that existed in other states," Zaken told reporters. "The legislature had the opportunity to see problems and cover them. There has to be a network of ATMs throughout the state where they can use the card. An employee needs to be able to get the balance by either calling a phone line or checking at an ATM."

But, Zaken added, there may still be some issues with using payroll cards in Connecticut, with possible fees to replace a lost card or fees for a card being declined at point-of-sale.

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