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Yahoo
a day ago
- Business
- Yahoo
EWA providers fight NY over court venue
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Dive Brief: Earned wage access providers DailyPay and MoneyLion Technologies are battling New York's attorney general over whether complaints the state filed against them should be heard in state or federal court. DailyPay sought to shift the lawsuit filed by Attorney General Letitia James to U.S. District Court on April 25, less than two weeks after the AG's office filed it in state court. MoneyLion, the defendant in a separate New York case with similar claims, followed that same path on May 15. U.S. District Judge John Koeltl in New York City canceled a July 31 court hearing in a related case, in which DailyPay sued the New York AG, according to court filings. The EWA provider sued April 7 seeking a declaratory judgment that its services don't constitute lending and that it hasn't violated the Consumer Financial Protection Act or New York state laws. Dive Insight: The issue of venue has stayed the state's response to DailyPay's complaint. New York has two weeks to respond once the federal court decides where the state's complaints should be heard, according to federal court filings. DailyPay and MoneyLion argued that New York's use of the federal Consumer Financial Protection Act for claims of deceptive and abusive conduct against consumers implicates multiple federal questions. New York-based DailyPay said that the state's 'demand for federally-created remedies that are unavailable under New York law — namely civil penalties and costs under the CFPA — necessarily raises substantial and disputed federal questions.' In its removal filing, lawyers for New York-based MoneyLion said that the New York AG 'appears to be the first agency, federal or state, to bring actions seeking to apply the CFPA to an EWA product. MoneyLion is unaware of any judicial decision addressing the application of the CFPA to EWA products.' However, removing the DailyPay case to federal court 'will deprive New York courts of their proper role in interpreting and applying New York law to ongoing evasion by an emerging, exploitative industry in favor of a federal forum for which Congress expressed no preference,' the Attorney General's office wrote in a June 23 filing seeking to have its DailyPay case returned to New York court. The AG also argued that Congress intended the 2010 consumer financial law to be enforced by attorneys general in state courts. Providers of EWA services, also known as on-demand pay services, have proliferated in recent years to extend services by which workers, mainly hourly employees, can tap their earned pay before a scheduled payday. The New York AG's complaints allege that both companies made 'illegal, high-interest loans' with fees that 'amount to outrageous annual interest rates in the triple digits.' New York alleges that the companies practices 'constitute illegal and deceptive conduct and abusive lending practices' that violate the state's usury laws. In its lawsuit, DailyPay said the state's 'alleged violations all depend on the OAG's flawed assumption that DailyPay's (on-demand pay) product is a loan,' noting that it doesn't require repayment from workers, charges interest or checks workers' creditworthiness. Recommended Reading NY AG alleges two wage access providers made illegal loans Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15-07-2025
- Business
- Yahoo
Connecticut enacts controversial EWA law
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Connecticut Gov. Edward 'Ned' Lamont last week signed a bill into law that imposes earned wage access regulations that providers of those services have opposed. Lamont, a Democrat, enacted the new law on Tuesday and it takes effect Oct. 1. The two houses of the legislature, which is controlled by the same party, passed the legislation over the past two months. States have increasingly sought to oversee expanding EWA services and their providers. Connecticut now becomes the 11th state to have passed a law in recent years specifically related to earned wage access, following Louisiana earlier this month and Maryland in May. A 12th state, California, imposed oversight under a different law. Earned wage access has become a popular way for employees to access their pay before a regularly scheduled payday, but the practice has also triggered controversy because of fees associated with some services, like accelerated payment. Dozens of EWA service providers, which include DailyPay, EarnIn, Flexwage Solutions and Chime, have voiced varying views about legislative proposals cropping up across the country. The Connecticut law caps fees that can be charged at $4 per advance, and $30 in total per month. It also limits the accrual of interest after the maturity date to 12% on a daily basis for the unpaid balance. In addition, the law caps late fees at 5% 'of the outstanding installment payment, excluding any previously assessed late fees, or a total of twenty-five dollars per month, whichever is less.' It also bars providers from asking for repayment prior to the user's next scheduled paycheck. The Chamber of Progress, which represents a number of fintechs including DailyPay and EarnIn, issued a Thursday press release criticizing what it called 'the nation's strictest monthly fee cap on EWA providers.' It also argued that the law will force Connecticut families living paycheck to paycheck to use more expensive alternatives and disadvantage smaller EWA service providers. EWA firms use an array of methods for providing the services, with some offering the payments through employers and others reaching out directly to consumers. They also have different revenue-generating models, with some exacting fees from users and others providing payment cards to workers and then reaping interchange fees from merchants when the users spend. States that have passed new laws chiefly calling for licensing of EWA providers have received support from the industry. But some legislative proposals, including Connecticut's, have drawn opposition. The American Fintech Council as well as the CEOs of DailyPay and EarnIn sent a June 25 letter to Lamont opposing the Connecticut bill. The letter writers, including AFC CEO Phil Goldfeder; DailyPay CEO Stacy Greiner; and EarnIn CEO Ram Palaniappan, also dinged the bill's requirement that EWA providers offer at least 75% of a worker's earned and unpaid wages for a pay period, saying it will unfairly preference the largest EWA companies. Despite the letter, DailyPay issued a Thursday press release and statement contending the law offers 'certainty' and means that EWA providers are 'exempted from Connecticut's Small Loan Act's annual percentage rate and other requirements of traditional loans and credit products.' When asked whether DailyPay had had a change of heart about the law, a spokesperson for the provider said the company adjusted its services to comply with the state's department of banking guidance. The spokesperson also offered a statement from the company's chief legal and strategy officer, Jared DeMatteis, saying DailyPay welcomed the 'full return' of its services to the state. Still, the statement also suggested DailyPay might contend the law's caps are not legitimate if they're not implemented correctly. A spokesperson for the company didn't immediately respond to a question seeking to clarify that point. We 'look forward to collaborating with lawmakers to ensure that any proposed regulatory changes, such as fee caps, are evidence-based and consider consumer impact,' DeMatteis said in the statement. Recommended Reading Louisiana, Connecticut advance EWA bills Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Forbes
09-07-2025
- Business
- Forbes
How Earned Wage Access Is Reshaping The Employer-Employee Relationship
Close-up Of A Businessperson's Hand Giving Cheque To Colleague At Workplace One of the many ways that business leaders are adapting to inflation and economic uncertainty is by helping employees with innovative payroll tools. Earned wage access programs— powered by fintech startups like Earnin, DailyPay, and One@Work (formerly Even)— are changing how workers get paid. With EWA tools, employees have the option to access their salary before their scheduled payday. These digital solutions embedded directly into payroll and HR platforms offer millions of hourly employees immediate access to wages they have already earned but not yet received. This shift is fundamentally altering the employer-employee financial relationship and reshaping workforce management. The trend is so popular that both Indiana and Maryland passed local EWA regulations in May, joining roughly a dozen states that already had their own EWA-specific regulations. For businesses, EWA is more than a perk. It is a strategic fintech-enabled benefit that drives talent attraction and retention, especially among younger workers who expect real-time control over their pay. As venture capital fuels innovation in on-demand pay and embedded finance, companies must keep pace with these technology-driven trends or risk falling behind. Yet, as EWA grows, questions arise about whether these programs create new debt risks and how regulators nationwide respond. Why EWA Is Taking Off According to a Consumer Financial Protection Bureau report, more than 7 million workers used EWA services in 2022, moving more than $22 billion in transactions. The Federal Reserve Bank of Kansas City found that nearly 80% of consumers aged 18 to 44 expect employers to offer such pay flexibility. The appeal is clear: EWA provides liquidity to workers caught between paychecks without pushing them toward costly payday loans that trap borrowers in debt cycles. For employers, these fintech-enabled solutions provide more than convenience. Integrated via APIs with payroll and financial wellness platforms, EWA reduces employee stress and turnover. Faster wage access helps workers cover expenses promptly and fosters a more stable and productive workforce, delivering measurable return on investment for businesses. States Split On How To Regulate EWA Rapid fintech innovation in EWA has outpaced regulators, producing a patchwork of state laws with differing views on whether these programs are loans. States like Arizona and Montana have issued official opinions stating that fully non-recourse, no-interest EWA products are not loans. These products simply accelerate payment of wages already earned, with providers taking on the risk if repayment fails and without engaging in debt collection or credit reporting. But the picture changes when providers charge fees. If an EWA product includes fees, especially those resembling finance charges or interest, it risks being reclassified as a loan under state laws. In that scenario, providers almost certainly must obtain licenses and comply with lending regulations, including interest rate caps and consumer protection mandates. Connecticut's SB 1396, effective October 1, 2025, reflects this approach by classifying fee-based EWA as small loans subject to licensing, fee caps and disclosure requirements. California's 2024 regulations similarly treat these transactions as loans subject to disclosure and consumer protections and mandates annual reporting and examinations. Other states including Nevada, Missouri, Kansas, Wisconsin, South Carolina, Arkansas and Utah have enacted comparable laws mandating licensing, surety bonds, no-cost wage access options, transparent fee and tipping disclosures, bans on interest or late fees and prohibitions on credit score use or debt collection. Wage Laws And The Early Pay Puzzle EWA programs must comply with state wage and hour laws that govern when and how employees must be paid. These laws protect workers by restricting unauthorized wage deductions and requiring timely, full payment of wages. In employer-funded programs, where employers advance wages early, wage laws like California's require signed employee consent for wage assignments and limit deductions to 50% of wages. Employers must ensure wage advances and deductions comply with these rules to avoid penalties. Third-party funded programs advance funds independently and recover costs through employee-paid fees or tips. These arrangements generally do not trigger wage deduction laws but may face other regulatory scrutiny (e.g., consumer credit regulations like the Truth in Lending Act, state payday lending laws and money transmitter licensing requirements). Fees charged by some EWA providers can also raise legal concerns. When fees are deducted directly from employee pay or charged for wage access, regulators may view them as unlawful wage deductions or obstacles to timely payment, increasing scrutiny and risk. U.S. Regulatory Challenges On The Horizon Several court cases across the nation are illustrating the risks and regulatory challenges facing EWA providers. This year, the New York Attorney General Letitia James filed a lawsuit against MoneyLion and DailyPay, accusing them of disguising predatory payday lending as EWA. The suit alleges excessive fees resulting in high annual percentage rates, deceptive tipping practices and misleading consumers about the voluntary nature of fees. This high-profile case signals increasing enforcement risk, particularly in states with stringent lending laws. At the federal level, the regulatory environment for EWA companies remains unsettled. While the CFPB's 2020 advisory opinion recognized EWA as a non-credit product, a 2024 proposed interpretive rule and a 2025 advisory opinion controversially classified it as credit, creating widespread uncertainty. The CFPB's recent decision to rescind the 2025 advisory opinion is seen as a positive step, yet federal oversight continues to evolve. The Regulatory Stakes Of Securitizing Earned Wages DailyPay's recent move to securitize earned wage receivables marks a key milestone in the fintech-driven earned wage access market. Securitization means the company pools earned wage receivables and converts them into asset-backed securities sold to investors. This process provides DailyPay with immediate capital to fund more advances and scale its operations. This innovative financing approach reflects growing investor confidence in earned wages as a reliable asset class, enabling scalable growth for on-demand pay solutions. However, as securitization of earned wages remains a relatively new practice, it raises important questions about consumer protection, transparency, and regulatory oversight. Regulators will need to carefully ensure that employee rights are protected, disclosures remain clear, and the management of these receivables meets rigorous standards. At the same time, fintech providers like DailyPay must implement robust risk management to address operational, legal, and reputational risks inherent in such complex capital structures. The evolving balance between innovation and regulation will be critical in shaping the future acceptance and sustainable growth of earned wage access financing models. How Companies Can Manage EWA Risks Employers must look beyond regulatory compliance to consider the long-term financial health of their workforce. While EWA provides short-term relief from cash flow challenges, fees and tipping practices risk creating debt-like cycles if not carefully managed. Consumer advocates and regulators remain concerned about predatory practices such as default tipping or hidden fees that could undermine EWA's promise as a financial lifeline. Best practices include providing clear and upfront disclosures about fees, voluntary tips and repayment terms. Employers should offer no-cost wage access options and monitor employee outcomes to identify potential overuse or financial stress. Integrating EWA within broader financial wellness initiatives promotes greater long-term stability. These strategies reduce regulatory and reputational risk while strengthening the employer-employee compact. EWA is more than a fintech innovation. It reshapes how workers access and manage their earned income. When designed responsibly, EWA alleviates financial anxiety for millions of workers and fosters healthier workplace relationships. However, if providers and employers fail to navigate the complex regulatory landscape and manage risks effectively, EWA risks becoming another costly form of credit disguised as convenience.
Forbes
09-07-2025
- Business
- Forbes
How Earned Wage Access Is Reshaping The Employer-Employee Compact
One of the many ways that business leaders are adapting to inflation and economic uncertainty is by helping employees with innovative payroll tools. Earned wage access programs— powered by fintech startups like Earnin, DailyPay, and One@Work (formerly Even)— are changing how workers get paid. With EWA tools, employees have the option to access their salary before their scheduled payday. These digital solutions embedded directly into payroll and HR platforms offer millions of hourly employees immediate access to wages they have already earned but not yet received. This shift is fundamentally altering the employer-employee financial relationship and reshaping workforce management. The trend is so popular that both Indiana and Maryland passed local EWA regulations in May, joining roughly a dozen states that already had their own EWA-specific regulations. For businesses, EWA is more than a perk. It is a strategic fintech-enabled benefit that drives talent attraction and retention, especially among younger workers who expect real-time control over their pay. As venture capital fuels innovation in on-demand pay and embedded finance, companies must keep pace with these technology-driven trends or risk falling behind. Yet, as EWA grows, questions arise about whether these programs create new debt risks and how regulators nationwide respond. Why EWA Is Taking Off According to a Consumer Financial Protection Bureau report, more than 7 million workers used EWA services in 2022, moving more than $22 billion in transactions. The Federal Reserve Bank of Kansas City found that nearly 80% of consumers aged 18 to 44 expect employers to offer such pay flexibility. The appeal is clear: EWA provides liquidity to workers caught between paychecks without pushing them toward costly payday loans that trap borrowers in debt cycles. For employers, these fintech-enabled solutions provide more than convenience. Integrated via APIs with payroll and financial wellness platforms, EWA reduces employee stress and turnover. Faster wage access helps workers cover expenses promptly and fosters a more stable and productive workforce, delivering measurable return on investment for businesses. States Split On How To Regulate EWA Rapid fintech innovation in EWA has outpaced regulators, producing a patchwork of state laws with differing views on whether these programs are loans. States like Arizona and Montana have issued official opinions stating that fully non-recourse, no-interest EWA products are not loans. These products simply accelerate payment of wages already earned, with providers taking on the risk if repayment fails and without engaging in debt collection or credit reporting. But the picture changes when providers charge fees. If an EWA product includes fees, especially those resembling finance charges or interest, it risks being reclassified as a loan under state laws. In that scenario, providers almost certainly must obtain licenses and comply with lending regulations, including interest rate caps and consumer protection mandates. Connecticut's SB 1396, effective October 1, 2025, reflects this approach by classifying fee-based EWA as small loans subject to licensing, fee caps and disclosure requirements. California's 2024 regulations similarly treat these transactions as loans subject to disclosure and consumer protections and mandates annual reporting and examinations. Other states including Nevada, Missouri, Kansas, Wisconsin, South Carolina, Arkansas and Utah have enacted comparable laws mandating licensing, surety bonds, no-cost wage access options, transparent fee and tipping disclosures, bans on interest or late fees and prohibitions on credit score use or debt collection. Wage Laws And The Early Pay Puzzle EWA programs must comply with state wage and hour laws that govern when and how employees must be paid. These laws protect workers by restricting unauthorized wage deductions and requiring timely, full payment of wages. In employer-funded programs, where employers advance wages early, wage laws like California's require signed employee consent for wage assignments and limit deductions to 50% of wages. Employers must ensure wage advances and deductions comply with these rules to avoid penalties. Third-party funded programs advance funds independently and recover costs through employee-paid fees or tips. These arrangements generally do not trigger wage deduction laws but may face other regulatory scrutiny (e.g., consumer credit regulations like the Truth in Lending Act, state payday lending laws and money transmitter licensing requirements). Fees charged by some EWA providers can also raise legal concerns. When fees are deducted directly from employee pay or charged for wage access, regulators may view them as unlawful wage deductions or obstacles to timely payment, increasing scrutiny and risk. U.S. Regulatory Challenges On The Horizon Several court cases across the nation are illustrating the risks and regulatory challenges facing EWA providers. This year, the New York Attorney General Letitia James filed a lawsuit against MoneyLion and DailyPay, accusing them of disguising predatory payday lending as EWA. The suit alleges excessive fees resulting in high annual percentage rates, deceptive tipping practices and misleading consumers about the voluntary nature of fees. This high-profile case signals increasing enforcement risk, particularly in states with stringent lending laws. At the federal level, the regulatory environment for EWA companies remains unsettled. While the CFPB's 2020 advisory opinion recognized EWA as a non-credit product, a 2024 proposed interpretive rule and a 2025 advisory opinion controversially classified it as credit, creating widespread uncertainty. The CFPB's recent decision to rescind the 2025 advisory opinion is seen as a positive step, yet federal oversight continues to evolve. The Regulatory Stakes Of Securitizing Earned Wages DailyPay's recent move to securitize earned wage receivables marks a key milestone in the fintech-driven earned wage access market. Securitization means the company pools earned wage receivables and converts them into asset-backed securities sold to investors. This process provides DailyPay with immediate capital to fund more advances and scale its operations. This innovative financing approach reflects growing investor confidence in earned wages as a reliable asset class, enabling scalable growth for on-demand pay solutions. However, as securitization of earned wages remains a relatively new practice, it raises important questions about consumer protection, transparency, and regulatory oversight. Regulators will need to carefully ensure that employee rights are protected, disclosures remain clear, and the management of these receivables meets rigorous standards. At the same time, fintech providers like DailyPay must implement robust risk management to address operational, legal, and reputational risks inherent in such complex capital structures. The evolving balance between innovation and regulation will be critical in shaping the future acceptance and sustainable growth of earned wage access financing models. How Companies Can Manage EWA Risks Employers must look beyond regulatory compliance to consider the long-term financial health of their workforce. While EWA provides short-term relief from cash flow challenges, fees and tipping practices risk creating debt-like cycles if not carefully managed. Consumer advocates and regulators remain concerned about predatory practices such as default tipping or hidden fees that could undermine EWA's promise as a financial lifeline. Best practices include providing clear and upfront disclosures about fees, voluntary tips and repayment terms. Employers should offer no-cost wage access options and monitor employee outcomes to identify potential overuse or financial stress. Integrating EWA within broader financial wellness initiatives promotes greater long-term stability. These strategies reduce regulatory and reputational risk while strengthening the employer-employee compact. EWA is more than a fintech innovation. It reshapes how workers access and manage their earned income. When designed responsibly, EWA alleviates financial anxiety for millions of workers and fosters healthier workplace relationships. However, if providers and employers fail to navigate the complex regulatory landscape and manage risks effectively, EWA risks becoming another costly form of credit disguised as convenience.
Yahoo
09-07-2025
- Business
- Yahoo
DailyPay lands novel funding
This story was originally published on Payments Dive. To receive daily news and insights, subscribe to our free daily Payments Dive newsletter. Earned wage access provider DailyPay closed on a $200 million asset-backed securitization deal with investment banks Barclays, Citi and Morgan Stanley, the earned wage access provider said in a press release last week. The transaction closed on June 25, according to a spokesperson for the company. Barclays was the lead bookrunner and structuring agent for the transaction, while Citi and Morgan Stanley were joint bookrunners. The transaction will enable DailyPay to work with more employers that use its on-demand wage services, according to the June 30 press release The $200 million securitization means DailyPay now has nearly $1 billion in debt financing backed by its EWA receivables, including a prior $760 million in secured debt with Barclays, Citi and and the financial firm TPG Angelo Gordon, the release said. New York-based EWA DailyPay contends that it is the first company in the earned wage access world to land such an ABS financing deal. All four classes of the new debt notes will trade publicly, the spokesperson said by email. 'This securitization marks a first for our industry, with strong investor demand validating our differentiated approach,' Deepa Subramanian, chief financial officer of DailyPay, said in a statement. 'With $25 billion in payments volume, we are continuously looking for new ways to optimize our capital structure to support our growth ambitions.' The securitization deal will let DailyPay expand its clientele by catering to more employers that want to offer EWA services to workers, CEO Stacy Greiner noted in the release. The company's clients include major employers such as Kroger, Six Flags and Dollar Tree, per the company's website. DailyPay has been locked in a battle with a key regulator in New York. In April, the company filed a lawsuit against the New York attorney general's office, seeking to prevent the enforcement agency from blocking its earned wage access services. Later that month, the New York attorney general's office sued DailyPay and MoneyLion Technologies for allegedly charging 'illegal, high-interest loans' to workers. As DailyPay and the New York attorney general face off in court, more states have been adopting EWA laws and implementing regulation to oversee the dozens of companies that have cropped up to offer EWA services over the past decade. This year, so far, multiple states, including Arkansas, Utah, Indiana and Maryland, have passed EWA laws, and most recently Louisiana joined the group this month. Those states largely had backing from the industry, but some states, including Connecticut, have taken a stricter approach to fees and other parameters that aren't as appealing to EWA providers. Meanwhile, other EWA players are working to expand their reach. Last month, Tapcheck, another earned wage access company, integrated its EWA software into Workday's human resources software, enabling workers to request wage deposits ahead of their typical payday. Recommended Reading Jack Henry earnings grab spotlight Sign in to access your portfolio
