CFPB Director Richard Cordray issued a statement warning employees "they cannot mandate that their employees receive wages on a payroll card. And for those employees who choose to receive wages on a payroll card, they are entitled to certain federal protections."
The watchdog agency published a bulletin spelling out worker rights when payroll cards are used.
Workers have the right to have all fees clearly explained in writing "in a form that consumers may keep," the agency said. Consumers also have a right to see an account history, which includes notification of any fees imposed for fund transfers.
Workers paid with payroll card systems have limited exposure to risks for unauthorized use, if it is reported in a certain time frame. And they have a right to an error resolution process, the CFPB said.
"The Bureau intends to use its enforcement authority to stop violations before they grow into systemic problems, maximize remediation to consumers, and deter future violations," the agency said.
"The CFPB has heard reports of employers, particularly in the retail and food service industries, distributing wages solely through payroll cards," the agency said.
"Federal law, however, prohibits employers from mandating that employees receive wages exclusively on a payroll card," the agency warned.