Banks are voicing concerns about a Federal Reserve Board proposal that would require them to issue paper account statements for payroll cards.
In a letter submitted to the Fed last week, the American Bankers Association recommended that payroll cards be treated the same as electronic benefits transfers used by government programs, which typically do not require periodic paper statements.
Nessa Feddis, the Washington trade group's senior federal counsel, wrote that requiring paper statements would raise banks' cost of issuing payroll cards and might discourage them from doing so.
For small banks "that lack economies of scale, adding an expensive component that offers little benefit may break the business case," she wrote. She also noted that many banks that issue payroll cards have found a high return rate for mail sent to payroll cardholders, limiting the value of generating and mailing the statements.
Instead the ABA recommended that payroll card holders have access to their balance through the telephone, Internet, or automated teller machines, as EBT recipients do. Cardholders could also obtain a written history upon request, covering at least 60 days prior to the date of request.
The ABA letter came in response to a request for public comment on proposed changes to Regulation E, which would define payroll cards as a consumer account, similar to a debit account. Reg E includes the Fed policies that govern consumer bank accounts.
And though banks agree that Reg E should cover payroll cards, many do not think that all the provisions of the rule should apply to this relatively new type of payment card.
The proposed changes would also include placing check conversion at the point of sale under the Reg E umbrella, and would require ATMs to notify consumers of any potential fees for balance inquiries or other electronic funds transfer transaction.
Payroll cards have become increasingly popular, especially for corporations with large numbers of unbanked employees. Issuing cards that are linked to a stored-value account can be much less expensive for employers than issuing payroll checks. Banks also like the cards because they can earn interchange fees from the transactions.
But murky legal questions remain about whether these payroll card accounts are in fact like traditional bank accounts. The Fed's proposed revision would lump payroll cards in the same category as other bank accounts because employee salaries are regularly deposited into them.
Mallory B. Duncan, the general counsel for the National Retail Federation, a Washington trade group for retailers, said in an interview Monday that not requirng periodic paper statements would have more benefit to banks than to consumers.
Payroll cards often go to people "who are not the most sophisticated individuals, who are traditionally unbanked," Mr. Duncan said. But they should have the right to study all their account information, he added. "You don't solve problems by limiting the amount of information they receive from their accounts."
The comment period closed Friday. A Fed spokeswoman said there was no schedule yet for a decision on the plan.
