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Surprise: New York State Court Ruling Means that NY Payroll Card Regulations Could go into Effect After All

The years-long endeavor in New York State to extensively regulate payroll cards (referred to in the NY regulations as “payroll debit cards”) recently entered a new phase when the New York State Supreme Court, Albany County, annulled the New York State Industrial Board of Appeals’ (“IBA”) February 2017 decision to revoke new payroll card regulations that had previously been issued in that state.  This means that, depending on the outcome of the recently filed appeal of the court’s decision, the controversial and highly restrictive NY payroll card regulations could become effective after all.

Payroll cards are prepaid cards that employers use to pay wages to their employees.  Such cards are already subject to certain employee protections under the federal Electronic Fund Transfer Act (Regulation E), and many states have also issued local laws governing such products.  In 2016, the New York State Department of Labor (“NYDOL”) adopted regulations under New York’s labor law setting forth several new requirements for payroll cards, including steep restrictions on fees.  Employers must ensure that employees can make withdrawals at no cost from at least one ATM that is within a “reasonable travel distance” from the employee’s home or work location.  In addition, the NYDOL’s regulations prohibit fees for (among other things) maintenance, point of sale transactions, overdrafts, account inactivity and ATM use to retrieve balance information.  One provision also requires that employers obtain written consent from employees at least seven business days prior to issuing the cards to the employees.

The NYDOL’s regulations had initially been revoked as the result of a petition filed by Global Cash Card, Inc., a company that issues payroll cards in New York, on the ground that the NYDOL’s prohibition on fees for banking services exceeded the agency’s regulatory authority.  However, the New York State Supreme Court annulled the IBA’s decision as being “arbitrary and capricious.”  While we wait to see the outcome of the pending appeal, many employers, banks and program managers will need to analyze their payroll card programs in New York State in light of the NYDOL’s regulations.

A copy of the New York State Supreme Court’s decision is here and the NYDOL 2016 regulations are here.

Copyright 2020 K & L GatesNational Law Review, Volume VIII, Number 204


About this Author

Judith E. Rinearson, KL Gates, federal consumer protection lawyer, anti money laundering attorney

Judith Rinearson is a partner in the firm’s New York and London offices. Ms. Rinearson concentrates her practice in prepaid and emerging payment systems, electronic payments, crypto/virtual currencies, reward programs, ACH and check processing. She has more than 25 years of experience in the financial services industry, including 18 years at American Express’s General Counsel’s Office. Her expertise focuses particularly in the areas of emerging payments and compliance with state and federal consumer protection laws, anti-money laundering laws, state money transmitter...

Eric A. Love, KL Gates, Capital Markets Compliance Lawyer, Treasury Legislation Attorney
Law Clerk

Eric A. Love is a member of K&L Gates’ Public Policy and Law Practice and is based in the Washington, D.C. office. Mr. Love focuses on federal legislative and regulatory policy issues related to financial services and capital markets, with a particular emphasis on securities and corporate governance. 

Prior to joining K&L Gates, Mr. Love served as a special assistant in the Office of Legislative Affairs at the U.S. Department of the Treasury. In this capacity, he worked to help advance Treasury’s legislative agenda on a broad portfolio of international economic issues, including international financial services regulation, development, banking and securities, trade and investment, climate finance and monetary affairs. 

Immediately before joining Treasury, Mr. Love served for six years in a number of positions in the office of Congressman Melvin L. Watt of North Carolina, including as the senior legislative staff member responsible for advising the Congressman on all issues within the jurisdiction of the House Financial Services Committee.