May 07, 2014
May 07, 2014
Good afternoon, Chairman Young, Ranking Member Hagan and members of the committee. My name is Kalitha Williams and I am the policy liaison for asset building at Policy Matters Ohio, a nonprofit, nonpartisan organization with the mission of creating a more vibrant, equitable, sustainable and inclusive Ohio. My work centers on household financial stability and consumer protection issues. I also convene Ohio CASH, a statewide coalition of organizations focused on improving the financial and economic conditions for low- and moderate-income families and communities. Thank you for the opportunity to testify today regarding House Bill 253.
According to the Corporation for Enterprise Development’s 2014 Assets and Opportunities Scorecard, nearly 9 percent of Ohio households are unbanked. Payroll debit cards, being used widely, may help unbanked workers by allowing them avoid check cashing fees, providing more security than carrying cash, and giving card holders the ability to make phone and online purchases. Employers may also save money by not printing paper checks. In 2012 over $34 billion dollars was loaded on 4.6 million payroll debit cards, according to industry research; by 2017 that number could rise to nearly $69 billion dollars on 10.8 million cards.
Despite the benefits and growing usage, Ohio workers should be able to decide how they receive their pay. Last year, the National Consumer Law Center, a national consumer protection organization, and the American Payroll Association, a trade association of payroll administrators, came together and developed recommendations for payroll debit cards. The recommendations were designed to ensure that payroll cards are good for both workers and employers. House Bill 253 includes some of these recommendations. The full recommendations are as follows.
There have been complaints at the national and state level of employers having automatic opt-in policies for employees and/or creating obstacles for them to use other payment methods. The federal Consumer Protection Finance Bureau released a bulletin last fall in response to growing complaints. In New York, Attorney General Eric Schneiderman sent inquiries to several employers to see if they were engaging in these practices after he received complaints.
The primary complaint workers have about being forced to use payroll cards are the excessive fees attached to the cards. An investigative report in the New York Times described excessive fees charged by some card issuers, fees that workers found difficult to avoid. Netspend, the largest payroll card issuer, was found to charge 50 cents for each card purchase, $5 for reprinted statements, $10 to close an account, and $7.50 per month for card inactivity. In some cases, workers were found to be making less than minimum wage after all of the fees they incurred were added up. Ohio workers should not have to pay fees to access their full wages.
HB 253 includes important consumer protections. Here are other provisions that would make this bill stronger for Ohio’s workers.
We ask that you protect Ohio workers by supporting House Bill 253 and the recommended changes. Payroll debit cards can be a viable option for unbanked Ohio workers. However, we need to ensure they have strong consumer protections.
Mr. Chairman, thank you for allowing me to testify on this legislation. I am happy to answer any questions that you or any of the other members of the committee may have.Policy Matters Ohio is a nonprofit, non-partisan research institute with offices in Cleveland and Columbus.
1 Atkinson, Nancy H. and Madeline K. Aufseeser. “U.S. Payroll Card Programs: Paving The Path For New Revenue,” The Aite Group, Boston, February 22, 2013.
 Kallianiotis, Niko, “Paid via Card, Workers Feel Sting of Fees,” The New York Times, June 30, 2013.
1 of 22