Labor and Consumer Groups Call on Governor to Rein in Excessive Bank Fees

On the heels of Bank of America’s recent announcement that it would begin extracting yet another costly fee from consumers, today groups representing workers and consumers called on Governor Brown to sign legislation on his desk that would begin to rein in excessive bank fees by limiting fees charged to low-wage workers through payroll debit cards.

The legislation, SB 931 (Evans), would standardize the practice of compensating workers by payroll debit cards by placing reasonable limits on the amount of fees banks are able to charge low-wage workers who receive their wages through debit cards.

“The big banks are exploiting the most vulnerable workers through what’s become an all-too-common practice of charging hidden, excessive fees,” said Art Pulaski, executive secretary-treasurer of the California Labor Federation. “While many of us have become so disgusted by the banks gouging us that we’ve closed our accounts, workers who receive their wages on pay cards have no such luxury. By signing this bill, the Governor has a rare opportunity to deliver a victory for regular folks against banks and their oppressive fees.”

Approximately 8% of the workforce remains “unbanked,” meaning roughly 1.5 million Californians currently work without any access to bank accounts, direct deposit or similar services. Where such workers previously received wages via paper paycheck, in recent years unbanked workers have increasingly found themselves issued payroll debit cards.

Paycard-compensated employees must pay all fees and accept all account terms of the cardholder agreement drafted by a bank or card issuer of the employer’s choice. Worse yet, both the bank and employer have every incentive to cut their own costs through higher fees on workers, producing a market distortion with a predictable result: sky-high fees for workers and account terms few retail banking consumers would ever accept.

“The requirements of SB 931 are absolutely necessary to protect unbanked employees from excessive fees,” said Paul Leonard with the Center for Responsible Lending. “Working Californians are already struggling to make ends meet; they shouldn't have to pay to access their own hard-earned wages.”

SB 931 simply requires payroll cardholder agreements to offer workers basic protections and the means to avoid unreasonable fees to access wages. Banks and card issuers, for example, will have to disclose details of their paycard program, including upfront disclosure of all fees, terms and conditions, at no charge to the worker.

The bill also reins in the most egregious fee practices found in current paycard programs by banning fees to initiate or load a payroll card, as well as fees to participate in the program. Card contracts will also no longer be allowed to charge workers for access to online account information and transaction histories. SB 931 guarantees an employee’s free choice between a paper check, direct deposit, or payroll card, and establishes the right of a payroll card-compensated worker to withdraw all wages once with no fees.

“The banks of have no regard for the difficulties workers struggle with on a daily basis as the recession drags on,” Pulaski said. “Instead of helping us dig out of this mess, they’re adding insult and injury by tacking on additional fees any chance they get. By refusing to limit their excessive fees, they’re making life harder for millions of California. It’s time the governor sends a message to the big banks: Enough is enough.”

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