Q: Under Regulation E, what is a payroll card account?
A: A “payroll card account” is an account:
1. That is established directly or indirectly through an employer; and
2. To which electronic fund transfers (EFTs) of the consumer’s wages, salary, or other employee compensation (such as commissions) are made on a recurring basis.
12 CFR 1005.2(b)(3)(i)(A).
Because a payroll card account must be used to transfer wages, salary, or other employee compensation, it does not include some types of employment-related accounts, such as an account used solely to make disbursements unrelated to compensation such as petty cash reimbursements or travel per diem payments. Similarly, it does not include an account used solely to disburse incentive-based payments (other than commissions) that are unlikely to be the consumer’s primary source of employee compensation. For example, an account used solely to disburse bonus payments would not be a payroll card account. However, if an employer establishes an account and makes recurring EFTs of wages, salary, or other compensation to the account as well as incentive-based payments or payments unrelated to compensation, the
account is a payroll card account. Comment 1005.2(b)(3)(i)-2.
The EFTs of the consumer’s wages, salary, or other compensation must be recurring. A payroll card account does not include an account that is used solely in isolated instances, such as an account used to distribute a final wage or salary payment or to distribute wages, salary, or other compensation in an emergency when other payment methods are unavailable. Comment 1005.2(b)(3)(i)-2.
An account can be a payroll card account regardless of whether it is operated or managed by an employer, a third-party processor, a depository institution, or any other person. 12 CFR 1005.2(b)(3)(i)(A).
TIP - The Prepaid Rule does not change the definition of “payroll card account” in Regulation E. However, an account that is related to a consumer’s employment but is not a payroll card account may be covered as a prepaid account under another prong of the Prepaid Rule’s definition of prepaid account.