The Wrongologist

What’s
Wrong Today:

We read
about outrage after outrage against the US worker, the middle class and the working poor. Recently,
Robert Reich tweeted:

There is
so much economic injustice these days; it’s hard to keep up. Yet sometimes
the news is so outrageous, you’ll swear out loud and scare the dog.

Consider the
story of the McDonald’s workers being forced to accept payment for their work by
debit cards instead of checks. A Shavertown PA McDonald’s franchise required employees to accept
payment on a JP Morgan Chase payroll card. But the card imposes fees on
virtually every transaction. Among the costs: $1.50 for an ATM withdrawal, $5
for over-the-counter cash withdrawals and $1 to check the balance, 75¢ per
online bill payment and $10 per month if the card is left inactive for more
than three months.

As a
result of all of these fees, this McDonald’s franchise pays its employees less than the minimum wage/hour.

A
McDonald’s ex-employee just sued over it: The case is Natalie
Gunshannon v. Albert/Carol Mueller T-A McDonald’s et al., case number
7010-2013 in the Court of Common Pleas of Luzerne County.

Gunshannon
worked less than a month at the Shavertown, PA McDonald’s location when she
learned that the franchise required employees to accept payment on the Chase payroll card. According to the lawsuit, employees had no option to
receive a traditional paycheck or get paid by direct deposit. The lawsuit
contends that the practice violates the Pennsylvania Wage Payment and
Collection Act.

According
to Lenore Uddyback-Fortson, a PA Department of Labor spokeswoman, the
department is aware of the McDonald’s case, but could not confirm or deny if
there is an active state investigation. She did say:

Using
prepaid cards isn’t new, but is a growing trend. It is estimated that $60 billion in wages
will be paid out via payroll cards by 2014. That’s quite a siphoning of
other people’s dough back to the banks via fees charged to use these cards.

Think
Progress reported that the rise of prepaid debit cards has been a boon for
banks in state-level unemployment insurance programs as well, as the National
Consumer Law Center (NCLC) reported
in January. While the NCLC found some improvements since the early days of
prepaid benefits cards, the numbers remain ugly. Even in California, the
group’s highest-rated state, banks charge users $1.8 million in fees each year.
The cards “effectively shifted the cost of distributing payments from governments
to individuals,” as the AP put it, as the country’s biggest banks “seized
on government payments as a business opportunity.“

And
remember this: The financial reform legislation in
2010 exempted prepaid cards from regulation. Thus it is no surprise they have
proliferated and are used by governments at all levels. While proposals have
been considered, it seems not much has changed either, as outlined in the
Federal Reserve prepaid regulations information.

It’s so
ridiculous that the FTC’s warning video on fees basically implies to just find
a way to pay lower fees. There is no mention of how checks and cash are not
normally fee-based since one can easily find a no fee bank account.

Isn’t this
the epitome of abuse and ripoff?

These cards are used primarily by the young and the poor. Think Finance , an alternative financial products company, released a survey of more than 1,000 people ages 18 to 34 that found while 92% currently use a bank, nearly half, or 45%, say they have also used outside services including prepaid cards, check cashing, pawn shops and payday loans. To make sure you don’t get taken advantage of, you may want to get some more information about payday loans before you sign a contract.

For millennials, many of whom find themselves cash-strapped, in debt from student loans and underemployed, they seem willing to be stuck with extra charges when it comes to quick access to cash and credit. They will still be eligable for getting a credit card with no credit but that doesn’t mean they will have total financial freedom.

Ken Rees, president
and CEO of Think Finance:

And he points out
that more than 80% of survey respondents said emergency credit options are at
least somewhat important to them.

It
is unclear if Ms. Gunshannon’s lawsuit is going anywhere, but it shows again
how the system is rigged against the working poor. The banks get prepaid cards
exempted from government oversight and we see the logical outcome: Fees pile on
top of fees, and pretty soon a minimum wage job is no longer minimum wage.

So,
paper (greenbacks or checks) or plastic?

Add
this to Congress’ to-do list: Get. Debit. Cards. Under control.

Otherwise,
let’s pay Congress via a JP Morgan Chase debit card.