Reg E - Direct Deposit of Bank Employee Payroll

Answered by:

Question:

In what section of Reg E does it state that it is a violation for a bank to mandate a certain bank or their own bank to be used for employee payroll direct deposit?

Answer:

Section 205.10(e)(2) states:
Employment or government benefit. No financial institution or other person may require a consumer to establish an account for receipt of electronic fund transfers with a particular institution as a condition of employment or receipt of a government benefit.

The Official Staff Commentary further clarifies by stating:
1. Payroll. An employer (including a financial institution) may not require its employees to receive their salary by direct deposit to any particular institution. An employer may require direct deposit of salary by electronic means if employees are allowed to choose the institution that will receive the direct deposit. Alternatively, an employer may give employees the choice of having their salary deposited at a particular institution (designated by the employer) or receiving their salary by another means, such as by check or cash.

First published on BankersOnline.com 7/30/07