Lost in the debate around California’s regulatory environment is a simple fact: regulations didn’t crash the economy. Wall Street bankd crashed the economy.
Not only did greedy Wall Street bankers get us into this mess, they’re certainly not doing anything to help the middle class dig out. Bankers are even devising ways to exploit the economic crisis and the mass unemployment it’s caused to pad their pockets. That’s why the California Labor Federation partnered with consumer advocates and others on two key bills to protect workers from the worst Wall Street abuses.
AB 22 (Mendoza)—Employment credit checks. As the housing bubble burst and took unemployment figures through the roof, among the casualties were the credit records of California’s workforce. Untold numbers of responsible, hardworking Californians watched their credit scores collapse as subsistence-level unemployment benefits forced missed bill payments and a risky overreliance on credit card spending. For some, even disasters like foreclosure and divorce took hold and ravaged personal lives as well as finances.
To make matters worse, in recent years some employers had quietly started running consumer credit checks on job applicants. Despite clear evidence that the results of such research are riddled with mistakes and totally useless within the employment context, a growing number of employers began to rely on credit checks as a means of screening out workers deemed undesirable. In a horrible catch-22, countless idled workers found their damaged credit blocking them from the very employment and financial security necessary to repair their struggling credit scores.
AB 22 rights this wrong by limiting employment credit checks to those cases where an applicant’s credit history relates to the position in question. For example, under this bill, Wal-Mart can no longer snoop through the credit history of each and every person who wants a job stocking produce or sweeping floors. Credit checks will only be allowed for positions where workers have access to an employer’s bank or credit account numbers, large amounts of cash, or proprietary information, and credit history research will also be permitted for positions in financial institutions or with certain law enforcement agencies.
SB 931 (Evans/Yamada)—Payroll debit cards. In addition to trouble securing employment, workers with blemished credit histories also often find banks unwilling to offer, at any price, typical checking or savings account services—that’s one of the main reasons 8% of American households live and work with no connection to the banking sector whatsoever. Rather than offer accounts to these workers, banks decided instead to concoct “payroll debit cards:” largely unregulated and often brutally expensive cards on which unbanked workers could then receive wages.
Payroll debit cards, or “paycards,” work like this: instead of receiving a paper check, an unbanked worker is frequently now issued a card that looks and operates much like any other debit card. Employers load wages onto an account primarily managed by the bank or card issuer, and the card, usually branded with a VISA or Mastercard logo, can then be used at an ATM or retail location.
However, where ordinary debit card consumers can choose from any number of accounts offered by those competing for retail banking market share, workers paid by payroll card enjoy no such choice. 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.
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 reigns 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. Finally, and most importantly, the bill limits banks’ ability to gouge workers with unlimited fees every time a card is used at a retail location or in-network ATM.
Both AB 22 and SB 931 await action from Governor Jerry Brown. He has until October 9th to take action, and at some point before October 9th we hope the Governor makes a simple choice: put our economy and our workers before Wall Street banks. With or without these bills, the banks will be just fine, but without them, California’s most vulnerable workers will not. The Governor should sign both.