Earlier this week, the Tennessee Senate Commerce, Labor & Agriculture Committee passed a bill (SB2633/HB 3095) that would amend Tenn. Code Ann. 50-2-103 so that employers could require employees to be paid by direct deposit or, if the employee does not want direct deposit, by a prepaid debit card.
If a debit card is issued, it must permit the employee to make one no cost withdrawal from it (such as at an ATM within the network) for up to the full amount on the debit card. That could pose problems for ATM withdrawals where there are daily limits on the amount that can be withdrawn. The employee would then have to go into a bank and obtain the funds from a teller.
There would also be certain disclosure requirements for debit card use, namely, the employer must explain any fees the employee would have to pay for using the debit card.
Employers can do this now with the consent of the employee. This bill - if it passes - would permit employers to require employees chose between direct deposit or debit cards instead of, as now, cash or checks.
The bill is being promoted by Visa. Visa's lobbyist explained (the video of the committee meeting can be seen here) that over 20 other states have passed laws or adopted regulations of this nature. Visa's interest, obviously, is in increasing the use of debit cards as they get a percentage (from the merchant) of every dollar spent. I'm told by at least one bank that they do not charge an additional fee for obtaining a debit card over and above the fees charged for making direct deposits.
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