® ®This is a compilation of review items thatmany of the American Payroll AssociationCPPs suggest asking all of your prospectivepaycard providers. The list is comprised oftopics that may or may not be important toyour specific company, organization orsituation but are worth discussing in detailprior to selecting your preferred vendor. Does your paycard allow for A Top Tier Paycard Program respects and values overdrafts? your employees/cardholders and never charges overdraft fees as they create a negative cardholderMany payroll debit cards can be overdrawn and those experience.card programs charge “Over-limit or NSF fees” • The primary reason the unbanked are unbanked is largely due to past exposure to and their desire to Is your paycard instant issue avoid overdraft fees. Employers who implement with a paycard where an employee is subject to branded from day one of overdraft fees, is putting their employees back in program roll-out? the very same position the employee was avoiding? The majority of paycard providers still do not offer an • Overdraft fees are dependent upon provider can instant issue branded card to be issued/used be excess of $30.00/incident. immediately at the hiring manager’s location (i.e. VISA • Do they allow a “fee waiver period”? or MasterCard). • If yes, Why? Could it be to allow for the • Unbranded cards can only be used for ATM employee to not incur overdraft fees during transactions and are far more profitable to a the initial launch phase? paycard provider. • Respect and regard for the cardholder, your • An unbranded instant issue card is simply an employee is VITAL to your Direct Deposit / Paycard ATM card with associated higher cardholder fees Initiative and the Overdraft practice brings into and less “Pay to the Penny” access points. A question a paycard provider’s core focus. Always paycard that offers only ATM access severely try to choose a provider that has an outstanding limits the usability to the cardholder, forcing “Cardholder Experience” as the core focus in order cardholders to continue to live in a costly cash to avoid employee’s resistance to your Direct world (i.e. needing to purchase money orders to Deposit Initiative. pay bills)
• An ATM paycard even if only temporary, brings You want to avoid a paycard provider whose partner into question an employee’s ability to gain bank offers “payday loans”. access to their “pay to the penny”. Access to A payday loan (also called a paycheck advance) is a “pay to the penny” is a requirement in many small, short-term loan that is intended to cover a states for a paycard to be legally compliant to borrowers expenses until his or her next payday. the “letter of the law”. ATMs only provide a “spirit These loans are considered by many to be predatory of the law” access point as they rarely, if ever, in practice and can often carry interest rates of up to provide “pay to the penny”. 650% APR. • When a secondary upgraded embossed VISA or MasterCard branded card is offered, that The question an employer considering paycard upgraded card often comes with a fee. implementation should ask is a philosophical one. If a paycard provider’s partner bank has in the past or A Top Tier Paycard Program’s paycard is from day currently is offering a “payday loan” product, are they one, an instant issue branded card (VISA is the truly looking out for the best interest of my market share leader). A card program that enables employees/cardholders? Or, are they simply preying you to issue a VISA branded debit card at anytime, upon a particularly vulnerable demographic. including replacement cards. A preferred paycard program is fully compliant, affording the employee at least 5 ways to access their “pay to the penny”, free of charge, starting the first day an employee’s card is issued. Who is the paycard provider’s issuing bank?It’s important to ask the question and you shouldevaluate if the relationship is new to the paycardprovider. If it is new, why? Is it due to a Bank Failure? Since Oct. 6, MetaBank has operated under aWith the environment today, it is important to ask direcMve issued by the Office of Thrift Supervisionthese questions. Companies should take caution with (OTS) requiring the bank to discontinue selling itsa bank that has been through FDIC acquisition and iAdvance small dollar line of credit to third parties as ofwhen the FDIC Acquiring Bank is new to the prepaid Oct. 13, 2010, and limiting its ability to book newbusiness. This represents future risk to your prepaid business without OTS approval.cardholders and additional work for your company. The OTS direcMve is based on an examination of thePrepaid issuing banks are specialized and require bank, which alleges that MetaBank engaged in unfairdepth of knowledge for BSA and AML program or deceptive acts or practices (UDAP) in violation ofunderwriting. Without experience, interest or Section 5 of the FTC Act and OTS Advertisingunderstanding the NEW bank may simply discontinue Regulation in connection with its operation of thetheir participation in the paycard program altogether. iAdvance program.What can happen next and what does this mean to A Top Tier Paycard Program will bank with anYOU? industry leader in paycards. Look for NBPCAWhen an employer chooses to implement with a Founding Member Banks A founding member of thepaycard provider that subsequently and without Network Branded Prepaid Card Association (NBPCA)warning migrates to a different banking partner, that bank will have the goal to represent the commonemployer will be REQUIRED to re-issue all previously interests of the many players in this new and rapidlyissued cards under the NEW BANK program. This will growing industry. By bringing together a cross-sectionrequire the employers of those card holders to endure of network branded prepaid card leaders during thethe costly, time consuming and cumbersome process industrys formative years, the NBPCA can serve as aof updating their payroll systems. In essence, catalyst and contributor to the long-term success ofemployers will have to go through the rigors of the prepaid marketplace. This groups focus on keyimplementing a new paycard program and industry issues to ensure the best consumeremployee/card holders will have to be re-trained to experience.become acclimated to the “new” program.
What are the due diligences What is the process for lost or required of the sponsoring bank? stolen card replacement? Does the paycard program offer the convenience of card linking for- Is your company required to disclose your audited financials?- How long does it take to complete the due diligence lost or stolen cards? process? Lost and stolen cards can be a huge issue for companies of any size. A paycard program that A Top Tier Paycard Program’s sponsoring bank will doesn’t provide “true” card linking technology will not require audited financials in order to comply with create more time and effort for you and your KYC Policies. All that that should be required is a employees. simple questionnaire to be completed and a rare but • A cumbersome process of lost or stolen card possible site visit by an independent party (AML). replacement inevitably leads to a negative Sponsoring bank approval times should typically be cardholder experience. completed in fewer than 10 business days. • Employees may not have access to their funds while waiting for a mailed replacement card. • Employees will not have access to all features of program with a PIN only replacement card. Is the paycard compliant and • Employees may be subject to transfer fees to bring over balances. will the paycard provider offer • Required additional payroll data entry leads to data entry errors and card funding mishaps. indemnification?The majority of paycard providers are not willing to A Top Tier Paycard Program will utilize “cardindemnify your company regarding the compliance of linking” technology eliminating the hasslestheir card in all of your states of operation. One has to associated with lost card replacement. “Cardask themselves, why? If a paycard program is truly Linking” technology will ensure that your employee’scompliant to the “letter of the law”, indemnification money is SAFE & SECURE and that they may gainshould be a non-issue. access to their new card account as quickly as possible with little to no effort required of the payroll department. From the payroll department’s A Top Tier Paycard Program will be compliant to perspective, card replacements are a non-event with the “letter of the law” in all 50 States. The paycard “card linking”. provider should be willing to offer your company indemnification language regarding the compliance • Employee can obtain new card instantly on-site of their product. You paycard partner will work or by mail. closely with their issuing banks to ensure the paycard product is compliant with all applicable banking • Balances transferred from lost card to new regulations (BSA/AML, USA PATRIOT Act, Reg E, temporary card in real- time. Privacy Regulations, etc). Your paycard provider should be at the forefront of compliance legislation. A • Under no circumstances should the payroll paycard provider with expertise in the area of department need to update the direct deposit compliance will offer “peace of mind” as you roll out account number used to pay the employee, your paycard program within a single state or across eliminating possible data entry errors the nation. • All replacement cards are linked to the original account number on paycard system.
What is the back-end database What are the contract terms? structure? The vast majority of paycard providers require anSeveral paycard back-end systems are built on a exclusive binding long-term 2 to 3 year agreement.Microsoft SQL database structure. That means your company is COMMITTED for the duration – good experience or bad. • This technological foundation may lead to future scalability issues. These in-turn lead to potential • Can the Card Program change cardholder fees, issues of reissuance of cards or worse, you and such as Overdraft fees, during the term of the your employees not having access to their funds in agreement? If so, ask why this is allowed a timely manner. considering you are bound to a long term agreement? • Although widely used in general business Microsoft SQL is not considered an enterprise • Is the provider willing to include the “cardholder fee capable database product and lacks industry schedule” as part of the contract? leading encryption capability. A Top Tier Paycard Program’s agreement should A Top Tier Paycard Program’s paycard platform be SIMPLE and NOT require a long-termshould be built on a state of the art, industry leading, commitment. A paycard partner should earn yourdatabase that ensures the highest levels of data business every day and not feel the need to handcuffsecurity, encryption and scalability. This insures that their clients to contractual obligations. They’ll earnyou and your cardholders will always have access to your continued commitment by providing both theyour information and balances. A paycard platform employer & cardholder with superior support andbuilt on an Oracle database fulfills this requirement. customer service. • If at any time you are not satisfied, your company should contractually be allowed to exercise, without cause, a 60 day written notice of your intent to discontinue the card program without penalty. This approach will keep the provider on their toes and is the equivalent to a no cost exit for your company, if desired. • Your paycard partner of choice, SHOULD BE WILLING to include the “cardholder fee schedule” within the contract.