This week, New York became the latest state to introduce legislation aimed at regulating Earned Wage Access (EWA) services. Assembly Bill 258 titled — “An Act to Amend the Banking Law, in Relation to Providing for Income Access Services in the State” — contains several significant provisions that, if passed, will significantly impact EWA providers in New York.

The bill defines “earned wage access provider” as “a person or entity that: (a) provides, or offers to provide, on behalf of an obligor earned income access transactions to consumers earning wages or compensation from the obligor; or (b) offers earned income access transactions to, or enters into earned income transactions with, consumers.”

Key Provisions:

  • Licensing Requirements. EWA providers must obtain a license from the New York Department of Financial Services (DFS) to operate within the state.
  • Rate Cap. The DFS Superintendent is authorized to impose an “earned income access rate cap,” which limits the amount that can be charged for EWA transactions. Importantly, tips count toward this rate cap, while it is unclear if expedited funding/disbursement fees count toward the cap.
  • Truth in Lending Act (TILA) Disclosures. EWA providers are required to comply with TILA disclosure requirements. This includes providing clear and conspicuous information about the terms and costs of EWA transactions.
  • Annual Percentage Rate (APR) Disclosure. The bill requires EWA providers to disclose the APR associated with their services. Specifically, the bill states that “before a consumer enters into an earned income access transaction, the provider gives the consumer notice, in writing, of all fees associated with the earned income access transaction and the cost of the transaction, including the cost expressed as an [APR].” The APR calculation must include tips, while it is unclear if expedited funding/disbursement fees are included.
  • Non-Recourse Transactions. EWA transactions must be non-recourse, meaning that providers cannot pursue legal action against consumers for repayment or engage in debt collection activity.
  • Regulation of Tips. The bill requires that providers must inform consumers in writing that tips are voluntary. Providers cannot suggest tip amounts or pre-fill tip amounts during the transaction process. Voluntary tips must not cause the total fees for the EWA transaction to exceed the earned income access rate cap.

Other notable requirements include:

  • The consumer must receive the proceeds no less than one business day prior to the next regularly scheduled employer pay date.
  • The provider cannot charge a late fee or a prepayment penalty fee.
  • The provider may not pull a consumer report other than to verify the consumer’s source of income as part of determining the amount of proceeds. The provider must not report EWA transactions to a consumer reporting agency.
  • Advertising must not be misleading and must clearly and accurately disclose the cost of the service.
  • The provider cannot require a consumer to waive the right to class action to engage in an EWA transaction.

Effective Date

The proposed legislation will take effect 180 days after it becomes law.

Our Take:

New York is the latest state to propose or enact EWA legislation. Although the bill would provide a path for companies to offer either direct-to-consumer or payroll-connected EWA products in New York, it would impose certain requirements that are inapplicable for non-recourse EWA products with no mandatory fees. California, Kansas, Nevada, Missouri, and Wisconsin have all enacted EWA legislation. Further, the Consumer Financial Protection Bureau issued a proposed interpretive rule opining that EWA products — whether provided through employer partnerships or marketed directly to borrowers — are subject to TILA and Regulation Z requirements, discussed here.