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Wal-Mart, Home Depot Among Those Probed on Payroll Cards

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July 3 (Bloomberg) -- Wal-Mart Stores Inc. and Home Depot Inc. are among companies being investigated by New York authorities over fees charged employees on prepaid cards used as workers’ paychecks.

Companies, including Time Warner Cable Inc. and Darden Restaurants Inc., were asked for information such as disclosures to employees and the fees they pay, according to letters obtained by Bloomberg News.

“We are concerned about excessive or insufficiently disclosed fees which may unduly reduce employees’ take-home pay,” state Attorney General Eric Schneiderman’s office said yesterday in letters to the companies.

The use of prepaid payroll cards is growing, according to a February 2013 report by the research and advisory firm Aite Group. It said $34 billion in gross dollar volume was loaded onto 4.6 million such cards in 2012. The firm projects the use to rise by 2017 to $68.9 billion and 10.8 million cards.

Banks with payroll card programs include Bank of America Corp., JPMorgan Chase & Co. and Wells Fargo & Co., according to the report. Aite Group calls payroll cards a “sales opportunity” for bank issuers, generating fee revenue and potential consumer-banking customers.

Schneiderman separately is probing fast-food restaurants for labor violations including failure to pay overtime and insufficient reimbursement for work-related expenses.

Home Depot, Costco

In the inquiry into payroll cards, New York is seeking to determine whether the companies are complying with state law, according to the letters.

Home Depot doesn’t offer the payroll cards to employees in New York, said Paula Drake, a spokeswoman for the Atlanta-based home-improvement retailer. The cards are offered to employees in other states.

Employees of Wal-Mart, the world’s largest retailer, have the option of being paid by direct deposit, paper checks or payroll cards, and they may use the card to make free unlimited cash withdrawals at stores, said Randy Hargrove, a spokesman. The Bentonville, Arkansas-based retailer met with New York’s Labor Department after starting the program in 2009, he said.

The attorney general has also contacted Costco Wholesale Corp. and Walgreen Co.

Darden Restaurants, whose brands include Olive Garden and Red Lobster, complies with New York’s regulations, Hunter Robinson, a spokesman for the Orlando, Florida-based company, said in an e-mail.

Employee Feedback

“We have received strong feedback from our employees who prefer the pay card, as it is a convenient way to get access to their pay without incurring check-cashing fees,” he said.

Walgreen employees aren’t required to accept wages on the payroll cards, Jim Graham, a spokesman for the Deerfield, Illinois-based company, said in an e-mail. The company negotiated agreements with ATM providers in its stores to accept Walgreen pay cards without withdrawal fees, he said.

New York law requires employees to give advance written consent for payment of wages by payroll cards. A company can’t make using a card a condition of employment, Schneiderman’s office said.

The attorney general asked for a summary report of fees paid by employees or deducted from their accounts and copies of documents provided to employees. He’s also seeking communications between the companies and their payroll card provider or financial institution.

“Employees must have a method to obtain all of their wages in a timely manner, without incurring fees,” Schneiderman’s office said in the letters.

To contact the reporter on this story: David McLaughlin in New York at dmclaughlin9@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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