Treatment of Debit Cards under Proposed Regulations Implementing New York's Paid Family Leave Law

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1 April 8, 2017 Filed electronically at Heather M. MacMaster Deputy General Counsel Workers' Compensation Board 328 State Street Schenectady, New York Re: Treatment of Debit Cards under Proposed Regulations Implementing New York's Paid Family Leave Law Dear Ms. MacMaster: This letter is submitted on behalf of the Network Branded Prepaid Card Association (the "NBPCA"). 1 The NBPCA wishes to express its concerns with respect to certain aspects of the proposed rule implementing New York's Paid Family Leave ( PFL ) Law that were proposed by the Chair of the New York Workers' Compensation Board (the "Board") and published in the New York State Register on Feb. 22, 2017 (the "Proposal"). 2 In particular, the NBPCA wishes to express its concern with the treatment of debit cards under Sections , 5.8 and 5.9 of the Proposal. For the reasons discussed below, the NBPCA urges the Board to revise its Proposal to remove the restrictions pertaining to debit cards, but continue to allow debit cards as a method of payment. The requirements with respect to debit cards in Sections , 5.8 and 5.9 of the Proposal appear to have been based on certain rules promulgated by the New York Department of Labor (the "Department") on Sept. 7, 2016 (the "DOL Rule") addressing the use of debit cards for the payment of wages (referred to as "payroll debit cards"). As suggested by the Proposal, this is mostly likely because benefits replacing income are to be paid "in the like manner as 1 The NBPCA is a nonprofit, inter-industry trade association that supports the growth and success of network branded prepaid cards and represents the common interests of the many participants in this new and rapidly growing payments category. The NBPCA's members include banks and financial institutions, the major card networks, processors, program managers, marketing and incentive companies, card manufacturers, card distributors, payment industry consultants and law firms. The comments made in this letter do not necessarily represent the position of all members of the NBPCA. 2 NYS Register, Feb. 22, 2017, available at The full text of the Board's Proposal is available at 1

2 wages." 3 The NBPCA and its members expressed their serious concerns with the substance of the DOL Rule with the Department on a number of occasions and while the NBPCA desires to highlight some of these same concerns for the Board, it also wishes to make the Board aware that the DOL Rule was struck down by the State of New York Industrial Board of Appeals (the "Industrial Board") on Feb. 16, 2017, 4 nine days after the Feb. 7 deadline for the Board to submit the Proposal to the New York State Register in order to appear in the Feb. 22 publication. First, the NBPCA urges the Board to revise its Proposal to remove the contemplated requirements for debit cards because such requirements are impractical and are likely to harm employees by causing debit card providers and carriers to stop offering these products in New York. As noted above, the NBPCA shared its specific concerns with many of the requirements included in the DOL Rule with the Department on numerous occasions throughout the Department's rulemaking process. Two such requirements the NBPCA expressed its serious concerns over were the DOL Rule's requirements with respect to local ATM access and fee restrictions, both of which are included in substantially the same form in the Board's own Proposal. With respect to local ATM access, the NBPCA points out that many ATMs are independently owned and operated and the owners of those ATMs have the ability to move the location of their ATMs without any notice to the debit card provider. Thus, providers that do not own ATMs have no way of identifying which ATMs provide free services and which do not and further, have no control over the location of specific ATMs. The requirement is even more difficult in the context of PFL because insurance carriers will have no relationship with an employee until they apply for benefits. As such it would be very difficult for a carrier to determine whether there is an ATM within a reasonable travel distance to each employee's home or work since the carrier does not know which employees (of its many employer customers) will apply for benefits. Thus, any geographical obligation imposed in relation to ATM locations and features would be infeasible. The NBPCA believes that it is more realistic to require that the card be associated with a network of ATMs that has a substantial number of ATMs in the state. As for the fee restrictions in the Proposal, such restrictions impose onerous fee restrictions that are not present in New York or other jurisdictions for debit cards used for the payment of wages or income replacement benefits, are not related to full and free access to benefits, and that will significantly undermine the ability of employers and providers to offer debit card products to New York workers. Specifically, the prohibitions on ATM withdrawal fees, certain declined 3 See, e.g., N.Y. Workers Compensation Law In the Matter of the Petition of Global Cash Card, Inc. (Docket No. PR ), Feb. 16, 2017, available at Cards/%20NY%20Industrial%20Board%20of%20Appeals%20Ruling% pdf. 2

3 ATM transaction fees, card replacement fees, and inactivity fees would collectively make already thin margined programs in New York financially unviable. Enclosed with this letter are the comments prepared by the NBPCA and submitted to the Department. These comments set forth in detail the NBPCA's concerns with respect to the treatment of payroll debit cards under the requirements of the DOL Rule, which are included in substantially the same form and apply to "debit cards" in the Board's Proposal. We urge the Board to review these concerns and revise the Proposal accordingly to remove the impractical and onerous requirements for debit cards. Turning to the opinion of the Industrial Review Board, for the reasons discussed below, the NBPCA urges the Board to re-evaluate its authority to issue the requirements for debit cards included in the Proposal. In its decision, the Industrial Review Board ruled that the Department exceeded the scope of its authority by attempting to regulate debit cards used for the payment of wages in much the same manner as the Board is now attempting to regulate debit cards used to make PFL benefit payments. 5 The DOL Rule modified New York Labor Law Section 192, pertaining to the manner in which an employer pays wages to an employee. 6 The Department based its authority to issue the DOL Rule on Article 6, Section 199 of New York's Labor Law, which provides that the Commissioner of the Department may "issue such rules and regulations as he determines necessary for the purposes of carrying out the provisions of [Article 6]." 7 The Industrial Board reasoned that the Department exceeded the scope of its authority under Section 199 by imposing requirements that amount to regulating banking services. 8 Moreover, the Industrial Board noted that the DOL Rule went beyond the statutory language of Section 192 by regulating outside of the relationship between employees and employers and imposing restrictions on financial institutions. The Industrial Board also noted that, in addition to exceeding the scope of its statutory authority, the Department exceeded its authority by imposing requirements outside of its area of competence and expertise. Like the instant Proposal, the DOL Rule sought to impose prohibitions against fees charged by, and other activities of, debit card vendors and issuers. According to the Industrial Board, the New York Department of Financial Institutions (the "DFS") is the regulatory body in New York responsible for regulating banks and financial institutions, including regulating the fees these entities may charge for banking services. The 5 In the Matter of the Petition of Global Cash Card, Inc., page NY Labor Law 192 (2017). 7 NY Labor Law 199 (2017). 8 In the Matter of the Petition of Global Cash Card, Inc., page 10. 3

4 Industrial Board reasoned that fees associated with a payroll debit card are functionally equivalent to those associated with a checking account and therefore any rules seeking to impose such prohibitions or other requirements must appropriately come from the DFS. For these reasons, the Industrial Board concluded that the Department did not have the authority to issue the DOL Rule and struck it down accordingly. The instant Proposal seeks to regulate fees charged by, and restrict other activities of, debit card vendors and issuers in largely the same manner as the DOL Rule. In addition, the primary authority cited by the Board in issuing the Proposal, New York's Workers' Compensation Law Section 117, provides authority similar to that given to the Department under New York Labor Law Section 199. In particular, like Labor Law Section 199, Workers' Compensation Law Section 117 gives the Board the general authority to issue rules and make reasonable regulations consistent with the provisions of New York Workers' Compensation and Labor Law. Given the similarity with respect to the requirements for debit cards included in both the Proposal and the DOL Rule and the similarity of the authorizing statutes cited by the Board and Department respectively, the NBPCA urges the Board to, at a minimum, re-evaluate whether it has the authority to regulate debit card accounts, as opposed to the payment of benefits, in the manner outlined in the Proposal.. The Proposal indicates that PFL benefits are to be paid "in like manner as wages." Since the Industrial Review Board struck down the DOL Rule, the proposed provisions likewise should not be imposed on debit cards used for PFL benefits. Indeed, a payroll debit card that later receives PFL benefits would be subject to the provisions of the Proposal. 9 It would be preposterous to require a change in the terms and conditions of the payroll debit card account once an employee applies for PFL benefits. Finally, on February 3, 2017, the Board (with the assistance of the New York State Department of Taxation, Division of Treasury), released a Request for Proposal for Banking Services ("RFP") seeking bids from experienced and qualified financial institutions, based in New York State, to provide general banking services to the Board. The RFP on its face appears to be inconsistent with the debit card provisions in the Board's PFL Proposal. The Board is sending the banking community mixed messages by implicitly saying that debit cards are a safe option when utilized by the Board (or other state entities), but must be restricted when used by the private sector to make sure that employees are paid in a safe and efficient fashion. At a minimum, the NBPCA requests that the Board reconcile the language referencing debit cards in its Proposal with its RFP. 9 The Proposal defines "debit card" as "a card that provides access to an account with a financial institution established directly or indirectly by the employer, and to which transfers of the employee s paid family leave benefits are made on an isolated or recurring basis." 4

5 We appreciate your consideration of these important concerns and remain available to answer any questions you have regarding debit cards. Sincerely, Brad Fauss President and CEO NBPCA (202) Brian Tate VP of Government Relations NBPCA (202) Enclosures 5

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