On June 13, Nevada’s governor signed into law Senate Bill 290 creating the nation’s first statutory framework for earned wage access (EWA) providers operating in the state. The law appoints the state’s Commissioner of Financial Institutions to oversee the industry.
Earned wage access products allow consumers to access their earned wages before their scheduled pay date. While there have been efforts to define and regulate these products, such as through the issuance of proposed regulations in California, guidance from Arizona’s Attorney General, and less than definitive guidance issued by the Consumer Financial Protection Bureau, Nevada is the first state to create a statutory framework that defines and specifically regulates these products.
The law applies to providers of both direct-to-consumer EWA services and employer-integrated EWA services. Direct-to-consumer EWA services deliver an advance of earned but unpaid income based on data that is not employment, income or attendance data obtained directly from an employer or an employer’s payroll service provider. On the other hand, employer-integrated EWA services deliver advances based on information obtained directly or indirectly from the consumer’s employer or the employer’s payroll service provider.
Nevada’s law prohibits a person from providing EWA services without obtaining a license. Licenses will be issued via the NMLS platform and will require the submission of, among other things, the terms and conditions that will govern the issuance of the EWA. The license application should be available on or before September 30, 2023 and license applications must be submitted by January 1, 2024. Licensees will be required to submit annual reports to the Commissioner, which will include, among other items, copies of consumer complaints submitted to the Better Business Bureau and CFPB and a description of any resolution; a summary of the total number of users who did not receive an EWA product in the prior year but who paid a subscription fee or membership fee for a group of services that includes an EWA product, including a description of the fee; and the total number of users who received 12 or more EWAs in the prior year.
In addition to licensing and reporting requirements, EWA providers will be subject to a number of substantive requirements. EWA providers will be required to:
- Implement policies and procedures to respond to questions and complaints raised by users;
- Respond to a consumer complaint within 10 business days of receipt and submit a copy of the complaint, the answer, and other related documents to the Commissioner;
- Before entering into an agreement with a user, disclose to users their rights under the agreement and all fees associated with EWA services;
- Allow users to cancel any EWA agreement without being charged fees;
- If tips, gratuities, or donations are solicited, charged, or received, conspicuously disclose that these amounts do not directly benefit any specific employee of the EWA provider or any other person. The provider must also conspicuously provide an option for the user to select $0 as an amount of the tip, gratuity, or donation;
- If amounts are sought from a user’s bank account, reimburse the user for any overdraft or non-sufficient funds fees incurred by the user if the provider sought payment in a manner inconsistent with the that disclosed to the user.
The Nevada EWA law also prohibits:
- Sharing any fees, tips, gratuities, or other donations with an employer;
- Using a consumer’s credit report to determine eligibility for EWA services;
- Reporting information about the user’s use of the EWA to a consumer reporting agency or debt collector;
- Charging a late fee, deferral fee, interest, or other penalty for failure to pay outstanding proceeds, fees, tips, gratuities, or donation;
- Compel or attempt to compel payment by a use of EWA services through civil action, use of a third party debt collector, or to sell the obligation to a third-party collector or debt buyer.
For purposes of Nevada law, the new law expressly excludes EWAs from coverage under laws regulating deferred deposit loans, high-interest loans, title loans, and check-cashing services, money transmission, as well as the Payday Lender Best Practices Act and Installment Loan and Finance Act. Aside from the licensing provisions, the vast majority of the EWA’s requirements become effective upon the earlier of the passage of “any regulations and perform[ance of] any other preparatory administrative tasks that are necessary to carry out the provisions of [the EWA law],” or July 1, 2024.
While Nevada provides some much needed certainty to EWA providers, the products treatment under other state laws is unclear and disparate. For example, under the California DFPI’s proposed regulations, EWA products are expressly classified as loans. It is also unclear how federal laws might be interpreted to apply to EWAs. While, as we note above, the CFPB has provided some guidance relating to the characterization of EWAs under the Truth in Lending Act, it has not provided guidance regarding how other consumer credit laws, which might have broader applicability, would treat these products. There is also potential for different treatment of direct-to-consumer EWAs and employer-integrated EWAs.
While we welcome Nevada providing a framework for these products, EWA products continue to require special considerations due to the uncertain and disparate treatment by state and federal regulators.