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Compliance July 16, 2008
Senators Unveil 401(k) Debit Card Ban
Two U.S. Senators have announced a legislative proposal to ban debit cards linked to 401(k) plans.
Reported by Fred Schneyer
Senator Charles Schumer (D-New York) and Senator Herb Kohl (D-Wisconsin) said Wednesday that they oppose the 401(k) debit cards, which are being revived by companies seeking to capitalize on tightened access to consumer credit, according to a Reuters report.
“After retreating over the last few years, companies looking to raid Americans’ 401(k) accounts are making a comeback,” Schumer said, in a statement. “A decade ago, the mere idea of this legislation was enough to get companies to abandon this reckless practice. This time, we want to push this bill all the way to becoming law.”
Reuters said the debit cards typically carry a monthly bill for using the card that includes a minimum payment, interest and fees, plus additional interest paid to the card vendor.
With the cards, the total amount the user spends each day, either by swiping the card or writing checks, counts as a single loan. That means a user can accumulate multiple loans, each with different repayment terms, the news report said.