Mastercard to Add Consumer Protection Rules for Its Payroll Cards
BY Abigail Tracy
The credit card company will roll out new regulations Friday that will affect how employers pay their employees.
Mastercard will announce new rules Friday in response to concerns of workers who are required to use fee-carrying debit cards in order to be paid by their employers. The consumer-protection measures could have a significant impact on the way companies distribute pay to employees, The Wall Street Journalreports.
Mastercard is the second-largest payments network in the U.S. The company's new regulations will require employers to provide their employees with a choice of how they want to be compensated--either by check, debit card or direct deposit. Payroll card issuers will be required to allow consumers to withdraw money from their cards once a month, without any fees. Issuers will also have to provide card users with clear information about the fees associated with payroll cards, the Journal added.
Nearly 6 million U.S. workers are paid via payroll cards, which many companies use to avoid the cost of issuing physical checks. But the fees associated with the cards gained publicity last summer after a McDonald’s employee filed a class-action lawsuit against the fast-food conglomerate for not offering employees the option to be paid by check. In September, after the lawsuit, the Consumer Financial Protection Bureau announced that workers should be given the option. No formal regulations have been put in place yet, however.
Mastercard’s new rules will go into effect for current payroll card users by October, while new issuers of the cards will need to comply by July 2014, The Journal reported.