It turns out that low-wage workers at companies such as McDonald’s, WalMart, Home Depot and Darden Restaurnts don’t have to get paid by debit card – unless they want to see their earnings eaten away by high fees.
At least, that’s the view of the Consumer Financial Protection Bureau (CFPB), which issued a bulletin warning employers against the practice that has spurred at least one class action suit, according to the Associated Press. New York Attorney General Eric Schneiderman has also raised questions about using debit cards as an alternative to paychecks. Companies have argued that the cards are a cost-effective means of paying their workers.
ATM pay cards are mainly used by people without bank accounts, which experts say is a growing problem.
A 2011 survey by the Federal Deposit Insurance Corp. found that 28.3 percent of households are either unbanked or underbanked, meaning they conduct at least some of their financial transactions outside the traditional banking system. In 2009, that rate was 18.2 percent. Roughly 9 percent of households do not have a savings account, while about 10 percent lack a checking account.
“The most common reasons why households report they do not have bank accounts are that they feel they do not have enough money for an account, or they do not need or want one,” said the FDIC.
Unfortunately, many of these consumers wind up paying high fees to access their money through outlets such as check-cashing services. This proves yet again that many Americans remain angry at the nation’s financial institutions five years after the start of the worst economic bust since the Great Depression.
A whopping 37 percent of voters surveyed by the Center for Responsible Lending said they had been “overcharged” or deceived by a financial company. That perception is prevalent among African-Americans, voters in their 40s and middle-income voters. Not surprisingly, support for the CFPB’s stance on debit card pay practices is high among people who feel this way.
