December 2, 2023


Dive Brief:

  • The National Consumer Law Center last week issued a number of policy recommendations for states looking to regulate earned wage access companies, including encouraging states to use existing credit lending laws to regulate the growing on-demand pay industry. The recommendations were made jointly with the nonprofit Center for Responsible Lending.
  • Additionally, states can clarify that those laws cover earned wage advances and other fintech cash advance loans. If states do choose to create new legislation, however, the NCLC offered guidelines for consumer protection, including strict cost caps, setting default “tips” to $0 and requiring that EWA lenders be integrated into the employer’s payroll system, according to a recent post on the NCLC website.
  • “[EWA] loans often closely resemble payday loans, with fees that multiply into rates above 300% and cycles of reborrowing that result in workers paying to be paid,” the NCLC said in the issue brief published this month.

Dive Insight:

In the post, Boston-based NCLC called out Missouri and Nevada for passing “industry-backed” EWA laws, saying they “lack any meaningful substitute consumer protections.” The NCLC has expressed concern that the burgeoning on-demand pay industry, which includes players such as Payactiv, DailyPay and EarnIn, is not being treated like payday lending.

Multiple U.S. states have considered how to oversee the growing EWA industry. Last month, Connecticut issued new guidance regarding small loans, which could increase regulation in that state for earned wage access providers. California regulators have reviewed more restrictive rules for the industry. And Utah, New Jersey, New York, Georgia, North Carolina and South Carolina have all debated EWA legislation.

As states have begun to address EWA regulation, researchers are calling for a more uniform approach. In a June paper published through the Mossavar-Rahmani Center for Business and Government at Harvard Kennedy School, researchers argued that the Consumer Financial Protection Bureau should update and clarify existing guidance, and set fair standards across the industry.


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