PayrollOrg commented on the California Department of Financial Protection and Innovation’s (DFPI) proposed rule (PRO 01-21) that would regulate earned wage access (EWA) services.
The DFPI seeks to regulate EWA under the state’s financial services licensing law and to treat EWA as a loan because the funds are provided to employees in advance of a regularly scheduled payday. PayrollOrg disagreed with the DFPI’s approach to “sandwich these services into the definition of credit products, advancements, or loans.” The timing of providing earned pay to employees does not define it as a loan, PayrollOrg said.
Parts of the Proposed Rule
While PayrollOrg disagrees with DFPI’s treatment of EWA as a loan, it supports the no-recourse provision in the proposed regulations. Under this provision, if the EWA provider (or employer) miscalculates earned wages, the employee is protected from the potential of never-ending debt that a loan can cause.
In addition, PayrollOrg believes that the best approach to prevent predatory practices is to require EWA providers to report EWA activity periodically (i.e., employee use of their services) and to ensure providers disclose fees. PayrollOrg supported the proposed provisions on reporting requirements but only to the extent that they prevent predatory practices.
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Alice P. Jacobsohn, Esq., is Director of Government Relations at APA.
