According to a report released today by the FDIC, a shocking 26 percent of U.S. households have little or no access to banking service, and the problem hits poor and minority families the hardest. As a result, these individuals must often pay to have their payroll checks cashed.
Delaware employers should be aware that payroll debit cards may be a good way to help “unbanked employees” to avoid check cashing charges.
For many years, efforts to use payroll debit cards were thwarted by Delaware law. Under the Delaware Wage Payment and Collection Act, employers must pay all wages “in lawful money of the United States or checks provided suitable arrangements are made by the employer for cashing such checks for the full amount of the wages due at a bank or other business establishment convenient to the place of employment.” The Act further defines a check as being “a draft drawn on a bank and payable on demand.” In combination, those provisions appeared to preclude the use of payroll debit cards for wage payment.
Delaware Department of Labor regulations interpreting the DWPCA, however, were amended in 2004 to specifically authorize the use of payroll debit cards. The regulations state that an employer may issue “a payroll debit card which provides the functional equivalent of cash or a check.” It is the employers’ responsibility “to effectuate a payroll debit card system which will allow full payment of wages on the employee’s regular payday and without cost to the employee.”