Prepaid Payroll Cards and Compliance – Getting the Balance Right
Fifth in a Series
Here, Wendy Humphrey, the commercial prepaid team lead at Conduent, talks about one of the most important topics around: compliance.
Q: What makes compliance a unique challenge for prepaid?
A: Prepaid poses a really complex regulatory task — it’s a payment system. Users want payment solutions on their own terms. At the same time, they want to feel safe and protected with minimal risk.
At the moment, the Consumer Financial Protection Bureau is in charge. They set the regulations, keep tabs on prepaid payroll card program providers and try to educate cardholders and employees considering the switch. It’s a complex area to regulate given a multitude of state and federal regulations, and because it’s constantly evolving.
Q: So what are the key priorities for prepaid compliance?
A: The CFBP updates their policies on a regular basis, but there are four main areas. The first is access to account information – cardholders should receive periodic statements, or be able to access their accounts online. Many providers offer that for free which is great for employees.
The second priority is cardholder resolution. So any time there is a problem reported on a registered card, providers step in to resolve it, in a reasonable time frame.
Then there’s fraud protection. Cardholders can’t ever be charged more than $50 on unauthorized transactions – again, as long as those transactions are reported within a specified time frame. By the way, prepaid cards are FDIC insured.
The fourth is disclosure. Programs must be open about account fees, as part of enrollment and fulfillment materials, terms and conditions, and through regular updates that highlight any changes.
Q: That all sounds reasonable.
A: Right! But it’s not enough. There ’s one more key element– inclusion. To get the balance right with prepaid, it’s crucial to be upfront and honest about the benefits of the program.
Some people worry about there being too many restrictions, and that consumers will struggle to find programs that offer the features and benefits they need. This could be tricky territory for employers. Ideally, all employees should have the same access to prepaid payroll cards.
Q: So how do they get the balance right?
A: Well, first off, regulators and providers need to work together. It’s about mutual understanding, open dialogue, and collaboration. That’s the only way to keep prepaid as simple as possible, and fair at the same time.
Q: So what should employers specifically look out for when choosing a prepaid payroll card program provider?
A: Good question. First, their code of conduct should be available to the public. It should be transparent, and as comprehensive as possible. Second, they should have a proven track record of compliance–no outstanding issues or past transgressions.
Finally, providers should have an ethics policies and compliance review office, so they’re not just relying on the CFPB. A provider needs to be responsible for assuring their own compliance as well as provide guidance and assurance to clients on conformity to all regulations and mandates.
Q: How will compliance change in the future?
A: It’s hard to say. Prepaid is evolving so fast and policies are being updated all the time. The most important thing is to choose the right prepaid payroll program provider that is reputable in the marketplace and collaborates with your company to offer the right program for your employee's needs.
Next up: We conclude our series with a post on using prepaid cards to speed company payments.