PayrollOrg submitted comments to the California Department of Financial Protection and Innovation (DFPI) on the agency’s notice of modified proposed rulemaking on earned wage access (EWA). While the DFPI made some favorable changes to its proposed rulemaking, PAYO said the agency did not go far enough to understand EWA benefits.
Because funds are provided to employees before their regularly scheduled payday, the DFPI defined EWA as a loan subject to California’s Consumer Financial Protection and Financing laws. PAYO objected to terms “advances,” “loans,” and “finance lenders” in reference to EWA employee benefits.
A loan takes funds directly from an employee’s paycheck to pay back a debt. There is no debt in EWA benefits or interest payments and penalties. The EWA funds are merely provided to participating employees on a date earlier than the employer’s regularly scheduled payday. This is why employers provide real-time payroll information to their selected EWA provider to ensure that employees only receive disposable earnings.
PAYO agreed with the DFPI that EWA programs and providers should be regulated to create legitimacy for EWA providers in California and to prevent predatory practices. A simplified registration requirement in the modified rulemaking that informs payroll professionals, their employers, and employees makes sense.
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Alice P. Jacobsohn, Esq., is Director of Government Relations for PayrollOrg.