In between blasts of arctic air and record snow falls, we are starting to see state legislatures emerge from their winter hibernation and introduce new legislation. With regard to Earned Wage Access (EWA), first out of the cave in 2021 is South Carolina who earlier this week introduced S. 532 which would authorize EWA providers to operate in the state.
The legislation focuses exclusively on employer-integrated business models. It uses the term “earned income access” instead of “earned wage access” because it covers both employers and other persons who are contractually obligated to pay consumers for labor or services (called “obligors”). This means the bill encompasses independent contractors and the “gig” economy as well as traditional employees. Under the proposed law, the provision of EWA services would not be considered a form of lending.
To qualify for the protections of the bill, the provider must enter into a contractual relationship with the obligor and must verify the consumer’s earned wages or income based on data provided by the obligor. The consumer must consent to the data sharing in advance. The provider delivers the earned wages or income prior to the next scheduled pay day and the advance is recouped through a deduction to the next scheduled payment.
The bill allows the provider to assess a fee for the service as long as the fee is disclosed in writing to the consumer and the consumer consents to having the advance and fee deducted from their next payment. Consumers must also be told they have the right to receive the full amount of their wages or income if they wait for the next scheduled pay date.
Providers operating in South Carolina will have to register with the Department of Consumer Affairs and post a bond. Consumers who are unhappy with a provider may file a complaint with the Department.
Overall, this is a pretty simple and straightforward bill. It would authorize employer-integrated providers to operate in the state and allows them to collect fees and recoup advances through payroll deduction. Providers who comply with the law would not be subject to state consumer lending laws.
With this legislative initiative, South Carolina joins New Jersey as the two states with active EWA legislation in the pipeline. Bills introduced last year in California and New York died with the end of those legislative sessions. As the weather warms, the daffodils emerge and the cherry trees bloom, we expect to see more EWA legislation blossom in the states. If you have questions about legal issues related to EWA programs, please feel free to contact Steve Middlebrook in our Atlanta office.