New York State Introduces Bill Deeming EWA a Loan

Financial Services attorney Eamonn Moran was interviewed for an American Banker article about a bill in New York targeting earned wage access (EWA) providers through classifying EWA products as loans and capping interest rates at 16 percent. In addition to designating wages or cash advances as credit, the Stop Taking Our Pay Act (STOP Act) would deem as finance charges any fees paid in connection with EWA, including tips and subscription costs. Supporters of the bill argue EWA providers too often act as predatory lenders through excessive charges that push low-income workers into debt, while opponents including financial technology (FinTech) industry groups contend most consumers use EWA responsibly and New York's interpretation runs counter to that of other states and the federal government, most notably the Consumer Financial Protection Bureau (CFPB). Indeed, a proposed federal law would explicitly prevent EWA products from being classified as credit and prohibit states from deeming them as such. Mr. Moran noted New York is known for its aggressive approach toward consumer protection regulations and predicted a clash on EWA classification in the future.

"This could be an interesting showdown as state regulatory and legislative developments heat up on the consumer protection front and draft federal legislation containing broad preemption terms that would essentially nullify a state legislative effort like this one has been introduced," he said. "This also underscores the patchwork compliance challenges faced by EWA providers doing business across the nation, as different states consider and implement new (and sometimes competing) regulatory frameworks, unless and until a federal law is enacted that creates a level playing field in the sector."

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