First US Laws Regulating Earned Wage Access Get Passed

July 11, 2023
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Nevada and Missouri have become the first US states to create a legal framework for earned wage access products as regulatory interest is heating up.

Nevada and Missouri have become the first US states to create a legal framework for earned wage access (EWA) products as regulatory interest is heating up.

Last week (July 6), Missouri Governor Mike Parson signed a bill into law that creates registration requirements for EWA products and sets EWA-specific obligations and restrictions for businesses.

It includes protections for consumers such as strong requirements for transparency and that businesses must offer a no-cost, non-recourse option to all EWA users. It also puts limits on fees and prohibits providers from charging late fees.

The move follows legislation signed into law in Nevada in mid-June (June 13), which created a similar licensing and consumer protection framework for EWA.

Industry players have widely welcomed the legislative actions, which provide new rules tailored to EWA products rather than bringing them under existing lending laws.

“As the second bill to pass this year, it is clear that policymakers across the states have recognised EWA is a unique, innovative financial product that does not fit into legacy frameworks and requires its own registration or licensing system,” said Molly Jones, vice president of government affairs at Payactiv, one of the largest EWA providers in the US.

Payactiv previously called the passage of the Nevada bill a “watershed moment”, which creates a “gold standard” in policy regulation.

The Financial Technology Association (FTA) has also applauded Missouri for passing “bipartisan legislation supporting responsible innovation and giving consumers greater financial freedom”.

“We call on other states to follow suit.”

EWA is a rapidly growing financial product with an estimated availability of around 40 percent across the US. It allows an employee or gig worker to access funds based on earned wages that have not yet been paid to them.

The growing popularity of these products has put pressure on policymakers to ensure consumers are duly protected.

However, up until the passage of the laws in Nevada and Missouri, there were no specific EWA regulations at the US federal or state levels, which created uncertainty about whether they fall into the scope of lending regulations.

Regulatory and legislative activity has heated up significantly as a result in the last year, with several US states indicating that they plan not to treat EWA as a lending product.

One notable exception is California, which has recently proposed to qualify EWA as a loan and bring it under state lending laws.

If such a rule gets finalised, it may have a trickle-down effect on other states, industry sources told VIXIO.

For a more in-depth look at the EWA market, including the different types of products and the regulatory landscape, check out our previous coverage on this topic.

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