Connecticut Enacts Law Regulating Earned Wage Access Services

Connecticut has become the latest state to adopt legislation for earned wage access services, following the lead of Arkansas, Indiana, Kansas, Louisiana, Maryland, Missouri, Nevada, South Carolina, Utah, and Wisconsin, which have each introduced laws for these innovative financial services. The amendment to the state's existing small loan act imposes licensing and other substantive requirements on providers, while granting these advances limited relief from the act's annual percentage rate (APR) limits. Following guidance from the Connecticut Department of Banking in September 2023, the amendment provides greater regulatory certainty for these services in the state.

Key Takeaways:

• The amendment modifies the definition of "small loan" to include earned but unpaid wage or salary income advances, with certain restrictions on the principal amount and APR.
• Earned wage access providers must comply with new conduct requirements, including no credit scores, consumer disclosures, and a no-cost option for workers.
• Providers must verify workers' earnings and implement anti-stacking measures to prevent multiple advances on the same earned wage or salary income.
• Finance charges for earned wage or salary income advances are capped at $4 per advance or $30 per month.
• Providers must not charge late fees, deferral fees, interest, or other penalties for late payment or nonpayment.
• Providers may not accept payments via credit card or charge card, and may not share finance charges with employers.
• Overdraft fees and settlement scheduling regulations also apply.
• Providers must make transaction-level information and total information regarding advances readily available to workers.
• The amendment clarifies that earned but unpaid wage or salary income advances are subject to Connecticut's small loan act.

Statistics:

• 11 states (Arkansas, Indiana, Kansas, Louisiana, Maryland, Missouri, Nevada, South Carolina, Utah, Wisconsin, and Connecticut) have adopted legislation for earned wage access services.
• $4-$30: capped finance charges for earned wage or salary income advances.
• 75%: minimum percentage of earned but unpaid wage or salary income that providers must offer to workers.
• 34 days: maximum number of days after an advance is provided before the worker's next scheduled paycheck or direct deposit payment from their employer must be scheduled for payment.
• 6 months: frequency at which providers must review and analyze data to prevent advances from being provided to workers who received an advance from another provider on the same earned but unpaid wage or salary income.

Sources:

• Public Act 25-155, Connecticut General Assembly.
• September 2023 guidance regarding earned wage access services from the Connecticut Department of Banking.
• Mondaq, Connecticut Enacts Law Regulating Earned Wage Access Services.