SB 586 - This act creates new provisions relating to earned wage access services.EARNED WAGE ACCESS SERVICES
An earned wage access service is the business of delivering funds that have been earned but are unpaid, referred to as proceeds, to consumers prior to the next date on which an employer or other person paying a salary, wages, compensation, or other income to a consumer is obligated to pay such funds.
REGISTRATION REQUIREMENTS
The act prohibits any person from engaging in the business of earned wage access services without registering with the Division of Finance by filling out a registration form and paying a $1,000 registration fee. The act outlines the obligations and restrictions on how an earned wage access services provider may engage in business, including how services may be provided, notices required to be given consumers, and the types of fees that may be charged.
PROCEEDS PROVIDED ON NON-RECOURSE BASIS
Providers are required to provide proceeds on a non-recourse basis, meaning that a provider may not compel or attempt to compel repayment by a consumer of outstanding proceeds through any of the following means:
· A civil suit against the consumer in a court of competent jurisdiction;
· Use of a third-party to pursue collection of outstanding proceeds or non-mandatory payments on the provider's behalf; or
· Sale of outstanding amounts to a third-party collector or debt buyer.
FEES AND OTHER PAYMENTS
Providers are limited in the fees that may be charged in connection with the provision of services. Providers are likewise prohibited from charging any late fee, interest, or any other penalty or charge for failure to repay outstanding proceeds. The act furthermore distinguishes between mandatory payments and non-mandatory payments. Providers are prohibited from charging mandatory payments, defined as an amount that must be paid by the consumer to the provider as a condition of receiving or repaying any funds paid to the consumer.
Providers may charge non-mandatory payment, defined as any other amount that is paid to a provider that is not a mandatory payment. Examples of non-mandatory payments are fees imposed by a provider for delivery or expedited delivery of proceeds to a consumer, as long as the provider offers the consumer at least one option to receive proceeds at no cost to the consumer; amounts paid by an obligor to a provider on a consumer's behalf, which entitles the consumer to receive proceeds at no cost to the consumer; a subscription or membership fee imposed by a provider for a group of services that include earned wage access services, as long as the provider offers the consumer at least one option to receive proceeds at no cost to the consumer; and a tip or gratuity paid by a consumer to a provider, as long as the provider offers the consumer at least one option to receive proceeds at no cost to the consumer.
Providers may not make the offering of earned wage access services contingent upon the payment of a non-mandatory payment. Providers are required to treat all such payments as non-recourse payment obligations, meaning that a provider may not compel or attempt to compel payment of such payments through any of the following means:
· A civil suit against the consumer;
· Use of a third-party to pursue collection of such payments; or
· Sale of outstanding amounts to a third-party collector or debt buyer.
Providers are required to disclose all non-mandatory payments imposed by the provider in connection with the provision of earned wage access services. Furthermore, providers are prohibited from making the offering of earned wage access services contingent on whether the consumer makes any
non-mandatory payments or on the size of any non-mandatory
payments that consumer may make to that provider in
connection with the provision of earned wage access
services, provided, however, that this prohibition shall not
be construed to prohibit a non-mandatory payment equal to a
percentage of proceeds provided.
INVESTIGATIONS AND PUNISHMENTS
The Director is allowed to make investigations to examine any registrant and may compel the production of all relevant books, records, accounts, and documents of registrants. Registrants are required to maintain records of its earned wage access services, which may be in electronic form, for at least two years. Enforcement measures are created allowing for the suspension or revocation of registration if a provider fails, refuses, or neglects to comply with this act. Any earned wage access services provider knowingly violating the provisions of this chapter shall be guilty of a class A misdemeanor.
EXEMPTIONS
The act does not apply to banks or savings and loan associations whose deposits or accounts are eligible for insurance by the FDIC; credit unions; and any person authorized to make loans or extensions of credit.
This act is substantially similar to provisions in HCS/SCS/SB 187, as amended (2023), HCS/SS/SB 181 (2023) and in HCS/HB 628 (2023), and similar to SB 586 (2023) and HCS/HB 759 (2023).
SCOTT SVAGERA