1. ®
®
This is a compilation of review items that
many of the American Payroll Association
CPPs suggest asking all of your prospective
paycard providers. The list is comprised of
topics that may or may not be important to
your specific company, organization or
situation but are worth discussing in detail
prior 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 cardholder
Many 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)

2. • 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 borrower's 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 should
evaluate if the relationship is new to the paycard
provider. If it is new, why? Is it due to a Bank Failure?
Since Oct. 6, MetaBank has operated under a
With the environment today, it is important to ask direcMve issued by the Office of Thrift Supervision
these questions. Companies should take caution with (OTS) requiring the bank to discontinue selling its
a bank that has been through FDIC acquisition and iAdvance small dollar line of credit to third parties as of
when the FDIC Acquiring Bank is new to the prepaid Oct. 13, 2010, and limiting its ability to book new
business. 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 the
Prepaid issuing banks are specialized and require bank, which alleges that MetaBank engaged in unfair
depth of knowledge for BSA and AML program or deceptive acts or practices (UDAP) in violation of
underwriting. Without experience, interest or Section 5 of the FTC Act and OTS Advertising
understanding the NEW bank may simply discontinue Regulation in connection with its operation of the
their 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 an
YOU? industry leader in paycards. Look for NBPCA
When an employer chooses to implement with a Founding Member Banks A founding member of the
paycard 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 common
employer will be REQUIRED to re-issue all previously interests of the many players in this new and rapidly
issued cards under the NEW BANK program. This will growing industry. By bringing together a cross-section
require the employers of those card holders to endure of network branded prepaid card leaders during the
the costly, time consuming and cumbersome process industry's formative years, the NBPCA can serve as a
of updating their payroll systems. In essence, catalyst and contributor to the long-term success of
employers will have to go through the rigors of the prepaid marketplace. This group's focus on key
implementing a new paycard program and industry issues to ensure the best consumer
employee/card holders will have to be re-trained to experience.
become acclimated to the “new” program.

3. 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 “card
indemnify your company regarding the compliance of linking” technology eliminating the hassles
their card in all of your states of operation. One has to associated with lost card replacement. “Card
ask themselves, why? If a paycard program is truly Linking” technology will ensure that your employee’s
compliant to the “letter of the law”, indemnification money is SAFE & SECURE and that they may gain
should 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.

4. What is the back-end database What are the contract terms?
structure?
The vast majority of paycard providers require an
Several 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-term
should be built on a state of the art, industry leading,
commitment. A paycard partner should earn your
database that ensures the highest levels of data
business every day and not feel the need to handcuff
security, encryption and scalability. This insures that
their clients to contractual obligations. They’ll earn
you and your cardholders will always have access to
your continued commitment by providing both the
your information and balances. A paycard platform
employer & cardholder with superior support and
built 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.