Earned Wage Access Regulatory Scrutiny and Compliance

Updated February 13, 2023

Estimated reading time: 3 minutes

Image: Woman holding mobile phone with FlexWage OnDemand Pay application on the screen.

Increasing Regulatory Scrutiny

Growth in the Earned Wage Access (EWA) industry has increased regulatory scrutiny from Federal and State lawmakers. As the innovator of OnDemand Pay and EWA, FlexWage has watched the market grow to include many vendors offering diverse solutions. Over the years, four primary areas of regulatory risk for EWA have emerged:

1. Lending regulations

2. Wage and labor regulations

3. Money transmitter or transfer service licensing

4. Consumer protection laws

Since 2009, FlexWage Solutions has been in ongoing communication with numerous federal and state regulatory agencies and consumer advocates.

These agencies include the U.S. Consumer Financial Protection Bureau (CFPB), the Department of the Treasury (USDT), the Office of the Comptroller of the Currency (OCC), the National Economic Council (NEC), the California Department of Financial Protection and Innovation (DFPI), New York State Department of Financial Services and numerous other states.

State Recognized Compliance

FlexWage is recognized by the California Department of Financial Protection and Innovation (DFPI) as the only non-loan EWA offering permitted to operate in the state without lender licensing. FlexWage is also the only EWA vendor recognized by the Kansas Office of the State Bank Commissioner (OSBC) as free from supervised loan licensing in Kansas. Additionally, the Connecticut Department of Banking (CDoB) has concluded that the FlexWage EWA product is not a loan and does not require state licensing.

California Regulatory Scrutiny

According to the California DFPI opinion letter, “The DFPI concludes that FlexWage does not originate or facilitate loans subject to the California Financing Law (CFL) or Deferred Deposit Transactions (DDTs) subject to the California Deferred Deposit Transaction Law (CDDTL). For this reason, neither FlexWage nor its employer partners are subject to the CFL or CDDTL’s licensing requirements.” 

>>> Earned Wage Access (EWA) Source of Funds. FlexWage partners with employers to assist them in providing employees with earned but unpaid wages in advance of payday. EWA funds paid to employees before payday are employer-funded. Unlike some third-party providers, FlexWage follows the regulatory recommended employer self-funding policy and does not provide the advanced EWA funds, nor does it assist employers in securing financing for those advances.

>>> Data Integration. FlexWage integrates with employers’ payroll and time/labor systems and may integrate with additional systems. FlexWage’s data integrations allow it to calculate an accurate net earned wage. FlexWage eliminates the risk of EWA over-payments by enabling the employer to set governing policies. EWA transfers and FlexWage’s fees are deducted from employees’ pay and appear on their payroll stubs and wage statements as an itemized deduction.

>>> EWA Transfer Delivery. FlexWage delivers all EWA transfers instantly to the employee’s choice of a debit card or bank account.

>>> Fee Structure. FlexWage’s business model varies by employer. For example, the employee may pay a per-transaction fee, the employer may pay a monthly fee, or a combination of the two fees can be constructed to accommodate the employer’s financial wellness goals. If the employee pays an EWA transaction fee, fees are capped per pay period and month, and fee caps bear no relation to an employee’s eligibility for additional EWA funds.

>>> Typical Usage. FlexWage enrolled users request $184 on average per EWA transaction and use the service 2.55 times per month.

>>> No Legal Recourse Against the Employee. FlexWage does not require any legally binding agreement with employees for EWA transfers and has no recourse against an employee should any employee ever receive more than they have earned.

>>> No Other Employee-Paid Products. FlexWage does not provide or market any additional products or services to employees that use the FlexWage EWA solution.

Kansas Regulatory Scrutiny

The Kansas opinion states:

“At this time, we have determined the services you provide do not require a supervised loan license. This determination is based on employer funding, no advancement of unearned wages, and the lack of a repayment obligation.”

Additionally, the Kansas OSBC said, “Based on the information you have provided, it does not appear that FlexWage Solutions LLC needs to be licensed as a money transmitter under the current KMTA [Kansas Money Transmitter Act].”

Connecticut Regulatory Scrutiny

The Connecticut opinion concludes:

“As we understand it, FlexWage partners with employers to assist employers in providing earned wages to employees prior to the scheduled payday for a fee paid to FlexWage. Monies paid to employees before payday are always employer‐funded and never paid by FlexWage and constitute earned wages that are never repaid by the consumer to the employer or FlexWage. In this scenario, since neither FlexWage nor the employer provides a loan of money or extension of credit, or a purchase or advance of money, to a consumer, FlexWage does not make, offer, or otherwise engage in small loan activity regulated pursuant to Sections 36a-555 to 36a-573, inclusive, of the Connecticut General Statutes, as amended by Public Act 23-126.”

EWA Done Right

FlexWage delivers “EWA Done Right” because it offers the most compliant, responsible, and transparent EWA solution in the market today.

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