Financial Update (Fourth Quarter 2006)
Payroll Cards to Receive
The amendments to address payroll card accounts are being made to Regulation E, which implements the Electronic Fund Transfer Act, and to the official staff commentary, which interprets the requirements of Regulation E.
Cards' use grows rapidly
Payroll cards have become increasingly popular with some employers, financial institutions, and payroll service providers as a means of paying wages or other compensation. A worker paid via a payroll card can use it to withdraw money at an automated teller machine and to make purchases at a point-of-sale terminal, as debit card users can.
Typically, an employer will arrange with a bank or a third-party service provider to issue employees a magnetic stripe–backed card that accesses an account. Each payday, the employer credits the account for the amount of the employee's compensation instead of paying the employee with a paper check or making a direct deposit. Some payroll cards also offer features such as convenience checks and electronic bill payment.
Amendments affect transaction information
Under the new rule, if institutions make account transaction information available by telephone, electronically, or in writing upon the consumer's request, then they are not required to provide periodic paper statements to consumers, as they do for checking account customers, for instance.
The Electronic Fund Transfer Act of 1978 establishes the rights, liabilities, and responsibilities of participants in electronic fund transfer (EFT) systems. The act covers transfers and includes those initiated through an automated teller machine, point-of-sale terminal, automated clearinghouse, telephone bill-payment plan, or remote banking service.
The act and regulation provide for disclosure of terms and conditions of an EFT service, documentation of EFTs by terminal receipts and periodic account activity statements, limitations on consumer liability for unauthorized transfers, procedures for error resolution, and certain rights related to preauthorized EFTs. The act and regulation also restrict the unsolicited issuance of ATM cards and other access devices.