Mercator Blog

NBPCA Provides Clarity On Payroll Issues – For Everyone
Date: January 21, 2014
Tim Sloane
Vice President, Payments Innovation
Prepaid payroll has recently become the target of Congress, regulators, consumer groups and the media. The media attention has either focused on poorly implemented programs, such as the one rolled out by a McDonald’s franchisee, or have created a story based on the worst features of several outlier programs presented as if “payroll cards” were a single product. These articles create a distorted view of prepaid payroll cards and of the larger prepaid payroll industry in general. A clarifying voice in all of this is the Network Branded Prepaid Card Association, which offers guidance to employees, employers, payroll card practitioners, the press, or anyone else interested in learning the facts about payroll cards.

Over the years the NBPCA has developed and released documents that help employees evaluate prepaid payroll programs. With guides for employees, guides for employers, program manager support with regulatory overviews and implementation best practices, the NBPCA covers all the payroll bases – which is good because confusion is rampant.

Perhaps the most frequent misconception is that payroll cards, or prepaid cards in general, are not regulated, when in fact they are regulated by both federal and state agencies. The NBPCA has published a document written by Kevin Petrasic and Cathy Beyda of Paul Hastings LLP called Payroll Cards: Navigating the Regulatory Landscape which identifies the many regulatory agencies, and the hurdles each puts in place, associated with delivering a prepaid payroll card program. This document clearly shows that the opposite is true, prepaid payroll is one of the most highly regulated products in the market today.

Media reports that discuss prepaid payroll often share a common theme indicating that employees are not sufficiently informed regarding the fees associated with payroll cards. Clearly, it’s impossible to assure that every employee fully comprehends the terms and conditions associated with the payroll card, but the NBPCA has certainly tried to assure each employee has the information at their disposal in a clear and concise fashion. It has done this by publishing documents that directly guide employees regarding the acquisition and use of a payroll card as well as communicate best practices to both employers and program managers.

The NBPCA has partnered with a key consumer advocacy group, Consumer Action, in developing two key tools to help employers and employees better educate about, and use payroll cards. The 2014 Employee Guide to Payroll helps employees educate themselves on how to best use their cards to optimize the services that fit their needs, and minimize behavior that drives fees (e.g. using an ATM outside of the free network provided). The guide outlines how to comply with state and federal regulatory requirements, and educates employees regarding the best use of the payroll card program offered. If the employee acquires the payroll card, the NBPCA also has the document Payroll Card Tips that will tell the employee different methods that can be used to minimize the costs associated with payroll card usage.

But the NBPCA doesn’t stop there. It also teaches and promotes practices to prepaid card program managers that will improve communications to employers and employees and identifies how a communications program should be orchestrated in Network Branded Prepaid Card Payroll Card Leading Practices. This document identifies the importance of effectively communicating how the fees associated with the card and how the card operates to employees. It also explains to the program manager the importance of educating the employer regarding the card and also to assure that employees are given multiple options for receiving their pay.

Another common misconception is that payroll cards are more expensive for cardholders. The NBPCA has made research available that addresses this misconception by publishing Payroll Cards Help the Underserved and Analysis of Network Branded Pay Cards. This analysis was conducted by Bretton Woods and analyzes the costs of payroll cards relative to other options including basic bank checking accounts, general purpose reloadable prepaid cards, and cash acquired through a check cashing store. These reports help to provide an objective comparison of costs consumers could incur using each of these options. The most common error of those reviewing prepaid payroll cards is that they compare them only to a check. But before the employee can buy anything, that check needs to be converted into cash for in-person payments and sometimes into money orders to pay bills. The prepaid payroll card eliminates the cost associated with converting a check into a useable form of payment. The Bretton Woods analysis takes these facts into account and avoids the common mistake of comparing a prepaid payroll card to a check.

I’ve only discussed a few of the many documents the NBPCA has made available on the topic of prepaid payroll. Here are some additional documents available on the NBPCA's website:

Infographic Comparison Paper Checks to Payroll Cards
Cardholder Protections
Prepaid Cards & Deposit Insurance
Prepaid Cards & Consumer Protection Legislation
Prepaid Cards and Anti-Money Laundering Policies

The NBPCA is using its industry position as the not-for-profit voice of prepaid, to promote and educate everyone in the prepaid payroll value chain and has established a prepaid payroll library that benefits everyone from employees and employers to banks and program managers. Given the open access provided by the NBPCA, it is frustrating that the most common narrative in media reports published today remains based on misinformation.