Georgia Latest to Go to Payroll Service Providers
On February 26, 2021, Georgia introduced HB 674, which would allow Earned Wage Access Providers (EWAs) to operate in the state and avoid loan qualification by meeting certain requirements, including registration.
This is the latest initiative in what has been an active space in recent months at state and federal levels. The bill would add a new section to the Georgia Financial Institutions Code and would apply to an “earned wage access service provider”, defined as “any person engaged in the activity of providing wages or salaries. income earned but not paid to a consumer ”in the state of Georgia.
The bill follows efforts by the Consumer Financial Protection Bureau (CFPB) and some states to clarify whether EWA services are regulated as “credit” or loan. In November 2020, the CFPB issued a Advisory opinion provided EWA programs that meet certain conditions are not “credited” under Regulation Z, followed by a compliance support sandbox Order of approval issued to an EWA supplier in December.
At the state level, the California Department of Financial Protection and Innovation has been active, signing memoranda of understanding with five EWA companies in January 2021 with one more promise to come. New Jersey and Caroline from the south both have pending EWA legislation, the latest of which was introduced in February 2021 and closely resembles Georgia’s legislation.
EWA vs loans
Georgia’s consumer loan laws would not apply to EWA providers who comply with the requirements of the bill. The bill stipulates that Chapter-compliant EWA services “shall not be regarded as lending activity” and that such EWA payments “shall not be regarded as loans made by the provider to the salary earned at a consumer”.
In addition, charges for EWA services would not “be considered as interest on such earnings access payments, and will not be included in determining an interest rate for the purposes of compliance with any law. which a supplier may otherwise be required to comply with. “
The bill only covers EWA services offered through a “debtor” – an employer or other person who is contractually obligated to pay a consumer “any amount of money on time, on time. on a project basis, piecemeal or on some other basis’ for work or services. Models intended directly for the consumer are not covered.
The bill would require the EWA provider to enter into a contractual agreement with an employer in which:
- The supplier verifies the wages / income earned by a consumer using the employer’s data directly relating to the consumer’s income during the relevant pay period; and
- The funds are released to the consumer ahead of the consumer’s regular payroll schedule and deducted from the consumer’s next regularly scheduled paycheck by the employer.
An employer is prohibited from sharing consumer salary / income data with an EWA provider unless (i) there is a contractual agreement and (ii) the consumer consents in advance to the sharing of such information.
A supplier may charge a fee for an EWA transaction and deduct that fee from the consumer’s next regular paycheck under the following conditions:
- The charges must be disclosed in writing to the consumer (i) prior to the completion of the EWA transaction and (ii) at the time of the EWA transaction.
- At the time of the EWA transaction, the supplier must obtain the consumer’s written permission to deduct the EWA payment and all applicable charges from the consumer’s paycheck.
- The supplier must, in fact, inform the consumer that the EWA service is optional by informing the consumer in writing of the right to receive the full amount of his salary, without any reduction, in the normal course, if the consumer waits for the next one. regular pay date.
The bill’s approach to fees deviates fundamentally from the criteria set out in the CFPB’s November advisory opinion, which requires “no payment, voluntary or otherwise” to access EWA funds or use EWA services in order to to constitute a “covered EWA program” which does not fall under the definition of “credit” in regulation Z.
The bill would require EWA providers to register with Georgia’s Ministry of Banking and Finance and comply with a bond requirement in order to operate in the state.
The bill also provides that a consumer aggrieved by an EWA provider can file a complaint with the Georgia Department of Banking and Finance, which will be reviewed and investigated as appropriate.