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Jul 18, 2007

Regulatory Rundown: Telecom, Money Services, and Payroll Cards

Ed Maldonado

1.Telecom/VoIP2.Money Service Businesses3.2007 Regulatory Legislative Summer Session update on Payroll Cards1- Telecom/VoIPFTC gives a “Yellow Light” to Net Neutrality legislation & policyOn June 27, 2007, the Federal Trade Commission released its agency recommendations to lawmakers Net Neutrality legislation. Their conclusion: lawmakers need to proceed with caution. The FTC recommendation was welcomed by many in the telecommunications industry who openly oppose the Net Neutrality regulation with requirements of keeping their networks neutral to all Internet providers. The rationale being that such regulation will likely stifle future innovation in telecommunications. While merely an agency recommendation, the debate over Net Neutrality continues to intensify. An important conclusion in the FTC report was that surveyed consumers strongly prefer the current open access model regarding the Internet. This finding comes at a point where more Americans are opting for broadband access to the Internet in their homes. Recent consumer polls by Pew Internet & American Life Project in February 2007 show that more Americans than ever, forty-seven percent (47%), now have broadband Internet access at home. Such usage and popular support, even at an abstract level, will likely weigh on the minds of Congress and the FCC who must decide where the Internet ends and telecommunications begins. The FTC report also concluded that the broadband market competition is growing and absent some market failure, policymakers should be cautious in enacting new or sweeping regulations. The question is whether this growth will continue, or, if broadband market saturation will force Internet Service Providers to push hard for Net Neutrality to ensure that newer services, like the true high-speed access offered in other countries, can be offered more cost effectively.2- Money Service BusinessesFinCEN releases updated SAR Guidance for Money Service BusinessesOn June 13, 2006, the Financial Crimes Enforcement Network of the Treasury Department (or FinCEN) released updated guidelines for Money Service Businesses (MSBs) in regard to their Suspicious Activity Reports (SARs). In the wake of an active enforcement year in 2006, the updated guidelines clarify three specific areas: 1) that banks, financial institutions, and money service businesses must provide supporting documentation to SARs when requested by FinCEN or appropriate Law Enforcement Agencies; 2) what constitutes supporting documentation; and 3) that no legal process is required for the disclosure of supporting documentation to FinCEN in connection to a SAR.The guidelines, FIN-2007-G003, stress that MSBs need to keep any and all documentation that resulted in the decision of the MSB to first file the SAR report. To date, many MSBs have struggled with concerns over possible violations of The Right to Financial Privacy Act when supporting documentation disclosures are requested by FinCEN. The new guidelines reinforce FinCENs power under its “supervisory, regulatory and monetary functions” and its appropriateness when requested in connection with an already reported SAR.3- 2007 Regulatory Legislative Summer Session update on Payroll CardsFederal Reserve Board amendments to REG-E effective July 1st 2007The Federal Reserve Board’s 2006 amendment to Regulation E (REG-E), that implements official Board input into the Electronic Fund Transfer Act, becomes effective on July 1st 2007. REG-E now covers payroll card accounts that are established directly or indirectly through an employer, where a consumer’s salary, wages, or other employee compensation is made on a recurring basis. The final rule also provides financial institutions with an alternative to providing periodic statements for payroll card accounts if they make account information available to consumers by specified means.Kansas: Law passed allowing payroll card for paying wagesEffective July 1st 2007, Kansas allows the use of payroll cards by employers for payment of wages. The law allows employers to pay employees with payroll cards as long as they allow at least one fund withdrawal per pay period at no cost to the employee. The withdrawal must be up to the total amount of the employee’s net wages. Employers cannot charge an employee initiation, loading or participation fees for wages paid electronically to a payroll card account, but can recover the cost to replace lost, stolen or damaged payroll cards. Further Administrative Rulemaking and regulation is anticipated within the next year. H.B. 2316, Laws 2007, passed April 16, 2007, effective July 1, 2007.New Hampshire: Payroll Card Act with updated Definitions under RSA 275:42Earlier this year, the New Hampshire Department of Labor recommended that employers be allowed to use automated payroll cards, provided that employee can withdraw his or her net pay from a bank, automated teller machine, or other location convenient to the place of employment without any cost. The resulting House Bill 611 and Senate 1556 were passed and adopted on June 27th 2007. The Act provides that employees retain “one free means” to withdraw their full and fair pay during each pay period. The Act also requires employers to provide written disclosures prior to authorization of the Payroll Card: 1) all the employee’s wage payment options in plain language; and 2) the terms and conditions of the payroll card account option, including, a complete itemized list of all known fees that may be deducted from the employee’s payroll card account by the employer or card issuer. Furthermore, employers are prohibited from using a payroll card that has an expiration date, unless the employer agrees to provide a replacement payroll card before the expiration date at no cost to the employee. Employers are also prohibited from requiring that the employee’s consent to wage payment by electronic fund transfer to a payroll card account be a condition of hire or of continued employment. In addition to written disclosures of charges under REG-E, the employer must give the employee the option to discontinue receipt of wages by a payroll card or payroll card account at any time, without any penalty.Minnesota: Law extended allowing payroll cards for paying wagesOn May 19th 2007, Minnesota extended a 2005 law permitting the use of Payroll Card accounts for wage payment. This extends the expiration date of the old law from May 31st 2007, one year, to May 31st 2008. The Minnesota law allows employers to use Payroll Cards issued by the employer, or a payroll card issuer, to give employees to access funds from their payroll card account. MN Statutes Ch. 158 (S. 2093), L. 2005, amended by Ch. 87 (S. 1495), L. 2007, effective May 19, 2007, at Sections 24-1200)Montana: Bill pending on wage payment by electronic funds transferA Montana House Bill (Number 325, 2007) remains pending, and is possibly stalled. The bill, entitled: “An act providing that an employer may require an employee to choose to be paid by electronic funds transfer or similar means of direct deposit or by a compensation card; and amending section 39-3-204, MCA,” gives the employee the right to use a payroll card, and for the employers to require the employee to make a choice.Oregon: Bill pending on use of payroll or debit card for wages, with oversightOregon House Bill 2556 seeks to amend Oregon Statutes 652.110 and 652.200 to allow payment of wages, including payment via payroll debit card. It provides that employers and employees can agree to use an electronic payment device for paying wages. The Bill includes give the Oregon Commissioner of Bureau of Labor and Industries the ability to assess civil penalties for violations. The bill is still pending.Vermont: Bill pending on Payment of Wages by Payroll Debit CardIn Vermont, Senate Bill 26 introduces amendments to 21 VSA Sections 342 and Section 343, and allows payment of wages by payroll debit card. The bill permits the general use of Payroll Debit Cards by employers for the payment of employee wages with certain restrictions. The bill is currently pending, but not dead.New Jersey: New Definitions proposed by Dept. of Labor for Payroll Debit CardsThe New Jersey Department of Labor has proposed four additional definitions to NLAC 12:55-1.2 regarding fees connected to paychecks and terms related to payroll debit cards. The biggest change proposed is to define “Payroll Debit Card” as “a magnetically encoded card” that allows users to access their funds both immediately and electronically. Employees must also be able to get their full wages in that pay period as defined by NJSA 34:11-4.2.Attorney Edward A. Maldonado is a practicing Attorney and the President of the Regnum Group, Inc. and can be reached

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