California to begin oversight of EWA

Dive Brief:

California’s Department of Financial Protection and Innovation said in a press release that it had reached a “major milestone” Tuesday in instituting new regulations to oversee earned wage access services, and other financial services, in a way that provides transparency and protects consumers.
The new state oversight will require EWA providers, and financial service providers in other areas not previously regulated, such as offering debt settlement services, to register with the state and submit data to the department. California’s new regulations will take effect next February.
“These regulations take an innovative approach to overseeing emerging financial service providers and will help the DFPI protect consumers across a range of products and services in need of formal oversight here in California,” DFPI Commissioner Clothilde Hewlett said in the release.

Dive Insight:

California joins a pack of states in seeking to regulate earned wage access providers for the first time. With EWA services, workers can tap their wages before their regularly scheduled payday, sometimes by way of their employer, or through companies offering those services direct to consumers in the market.

The services have been the subject of some controversy as regulators, both at the federal level as well as the state level, grapple with how to oversee EWA services that have proliferated over the past decade.

California’s new regulations were made possible by the state enacting the California Consumer Financial Protection Law (CCFPL) in 2020, with it taking effect the following year. That law was aimed at better protecting Californians from “unlawful, unfair, deceptive, or abusive acts and practices (UUDAAP) across the financial services marketplace,” the release said.

At the federal level, the Consumer Financial Protection Bureau said it agreed with the tack that California has taken in seeking to impose some consumer guardrails on EWA services. The federal agency has been slammed by negative commentary from the industry regarding an interpretive rule it put in place earlier this year saying EWA services are subject to lending laws.

Major EWA providers, including Payactiv, DailyPay and EarnIn, have been more supportive of state laws passed over the past two years that put in place less restrictive regulations mainly requiring company registration. Kansas, Missouri and Nevada are among the states that have passed such laws.