All In   |  July 03, 2013

Despicable Fee: Employers charging you for your paycheck

Chris Hayes takes a look at the incredible practice of using payroll debit cards to pay employees instead of a check or direct deposit, when the fees for using those cards are unavoidable.

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This content comes from Closed Captioning that was broadcast along with this program.

>>> atm card that also works as a debit card . if you use it at the wrong place, you're going to pay a fee for it. i have one, if i need to take out money, i will walk three extra blocks to get to a branch to avoid paying that extra fee. paying $3 to get out my own money. massive retailers like walmart and home depot are now paying their employees with payroll debit cards instead of paper checks, which seems fine and convenient and efficient, until you learn that those workers have to pay that fee and others no matter where they use those debit cards . think about what that means? it's like going down to human resources on friday to collect your check and they put out their hand and say, you have to give me $5 to get it. if you're making $7 an hour, one or two fees on these debit cards could take away a half hour of your pay just like that. here are some of the fees associated with the payroll debit cards . $1.75 withdraw fee after the first withdrawal. so a minimum wage worker taking home 150 to $200 a week can make one withdrawal for free, every other withdraw is 1.75 wherever you do it. balance inquiry 50 centses. 1.50 to move the money to your own bank account . 50 cents per purchase, and we're not done. $25 overdraft fee . $6 to replace the card. if you think you've outsmarted the system by using the card as little as possible, think again. a $7 inactivity fee. more than two dozen retailers have this $7 inactivity fee. sometimes it's less, a mere $2.50. talk about the banks getting you coming and going. and this isn't some boutique practice, huge retailers like walmart, walgreens and home depot use it. they give their employees a choice, direct deposit or an old fashioned check. many employees have no choice. in other cases, the employee is enrolled in the payment program automatically, and there's a small mountain of paperwork to get out of it. some employees are afraid to request other options. the reason for the growth of the practice is that it is a sweet deal for participating banks like city bank , bank of america , jpmorgan chase and wells fargo , and for the largest issuer of payroll cards, net spend. banks are making swipe fees the kind they were prohibited from making with regular atm cards. and offering savings to the employers. a calculator on visa's website estimates a company of 500 employees can save $21,000 a year by using payroll debit cards instead of checks. this year there are 4.6 million active payroll cards worth $34 billion. it's easy to see how the fees on billions of dollars can easily reach the hundreds of millions up to a billion dollars or more per year. everybody is making money off of it, except the low wage hourly employee who is losing money from the deal. sometimes so much so they are effectively reduced to sub minimum wage according to advocates and state and federal regulators. this heinous practice persists. there are three parties, the employee, the employer and the bank. and two of those three are making money off the deal, but not the working stiff. not all hope is lost. there is the case of natalie gunshannon who made $7.44 an hour. she had no choice but to use the payroll card , she quit and sued. just this week, the owner of the mcdonald's franchise changed their policy to offer direct deposit and paper checks. there is eric schneider man, a gift of the show, who sent letters to 20 employers, requesting information about the practice. we're concerned about excessive or insufficiently disclosed fees which may unduly reduce employee's take home pay. the question is whether these fees, particularly when there is no choice, violates state labor law . and the attorney's general office is looking into it with this inquiry. make no mistake, whether it's the norma ray of payroll debit cards or new york's attorney general, neither the big banks nor the big employers should feel free to extract money from their low wage employees just to get them their hard earned minimum wage paycheck. it's crazy i even have to say this, but here it goes. you should not have to pay just to get paid. we'll be right back with clip three.