Making payroll cards work for working people

As the son of parents who fought to get by, I know that every dollar counts to working-class families. For most Americans, gaining access to their own hard-earned money is simple enough. They go to an ATM machine, stop by a bank or pull out a credit card. But for millions of Americans, the financial system so many of us take for granted doesn’t exist.

For these folks, gaining access to a paycheck means stopping by an overpriced check casher. It means no access to the online marketplace. Savings, if possible, are often kept under the proverbial mattress.

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According to the Federal Deposit Insurance Corporation (FDIC), roughly 34 million American households have little or no access to banking institutions or products. Lack of access to basic financial tools and banking institutions is a particularly acute problem for minorities. Fifty percent of all Latino households, some 6.6 million, are financially underserved. The percentage for African American households is even higher at 55 percent.

Fifty years after Lyndon B. Johnson launched his war on poverty, much work remains to be done.  Income inequality is a hotter topic than ever in Washington with leaders from both sides of the aisle offering ideas on how to chip away at the challenge. An important first step should be making sure that every hard-working American is part of the financial mainstream. We all deserve the security and affordability of basic banking services.

Prepaid payroll cards offer an important bridge to the financial mainstream. They allow workers to receive wages on a reloadable card and, for the first time, allow many folks to pay a bill online or participate in online commerce. Prepaid cards are an innovative, private sector solution to bring so many Americans into the world of 21st century commerce. 

But, even prepaid cards have their critics.

In recent months, new federal legislation was proposed that, if passed, would mandate more detailed fee disclosures for prepaid debit cards, of which payroll cards are a subset. Media coverage has zoned in on cases where workers were forced to use payroll cards without a choice or are hit with fees they didn’t know existed. These examples are certainly alarming, but lawmakers and regulators must be weary to avoid squandering the opportunity these cards offer the financially underserved in an effort to protect them. In some cases, the private sector is stepping up to police itself. 

MasterCard, which offers payroll card technology as a product, has stepped up to the plate and put in place basic standards they will enforce among companies using their cards. Self-imposed restrictions like this serve the interest of the company, which wants to continue to offer payroll cards as a consumer product, and the millions of financially underserved Americans who can gain access to basic banking functions by receiving wages on a card.

MasterCard’s new 6 Standards for Better Payroll Cards offer a path forward. The standards mean employees are empowered to choose a payroll card instead of being forced to use one. Users are now given one free transfer per payroll, which means working families won’t have to pay a fee to get access to their hard-earned money. And the cards now provide a zero-liability guarantee. No employee who uses a payroll card will ever be liable if the card is lost or stolen and used by someone else, which means the funds on the card are fully protected. That’s consumer protection, protection underbanked families have never had.

Addressing the challenge of financial exclusion isn’t going to be fixed by prepaid payroll cards alone. But payroll cards are an example of the type of innovative solutions so many families need. It’s important that lawmakers and regulators be mindful of the access these cards provide the financially underserved. And it is just as important that they work with electronic payment technology companies to create solutions that truly are in the best interest of American workers.

Núñez is the national chair of Master Your Card: Oportunidad, a public education campaign sponsored by MasterCard. He is also the former speaker of the California Assembly. 

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