In an Oct. 24 column published by Law360, partners David Reidy, Susan Rodriguez and Brian Coughlan and associate Christine Mastromonaco explained the need for regulators to clarify rules governing earned wage access services, which provide workers access to accrued wages before their next scheduled payday.
“A wave of fintech providers has emerged offering earned wage access, or EWA, solutions,” the authors wrote. Those companies have raised millions in venture capital over the past five years and partnered with major employers to provide EWA options to workers, they added. But the regulatory landscape remains unsettled for EWA programs, which differ from loan products.
“The details of a given company’s services — for example, whether employees are charged membership or transaction fees, how wages are accessed and settled on payday, whether employees may repay over more than one pay period, and whether the company provides other services such as loans, savings accounts, bill pay options or money transmission — may ultimately determine whether specific federal and state consumer and licensing rules apply,” the authors wrote.
Given the uncertainty, they wrote, “It is incumbent upon regulators to take notice and provide meaningful guidance to an industry actively engaged in addressing the cash-flow needs of the millions of Americans living paycheck to paycheck.”
Reidy leads McGuireWoods’ fintech group and Rodriguez chairs the firm’s financial institutions industry team. Coughlan is a partner in the debt finance practice and Mastromonaco is a financial services litigation associate.