What happened?

On October 11, 2024, the Office of Administrative Law (OPAL) approved the California Department of Financial Protection and Innovation (DFPI) final regulations. These regulations aim to classify most Earned Wage Access (EWA) programs as consumer loans, subjecting them to California’s consumer credit laws.

Quick Summary:

• These regulations will require EWA providers to register with the DFPI and comply with specific regulatory requirements.

What are the details?

• Classification as Loans: EWA products will be treated as loans under the California Financing Law (CFL).

• Income-Based Advances: Defined as advances based on income reasonably determined to have accrued to the benefit of the consumer but not yet paid. These advances must be scheduled for collection within 34 days, aligning with the anticipated payment date.

• Debt Collection Activities: Clarified to exclude initiating electronic funds transfers or payroll deductions to collect outstanding amounts.

• Registration Requirements: EWA providers must register with the DFPI and comply with specific regulatory requirements. Payroll service providers (PSPs) verifying earnings or performing related activities on behalf of EWA providers are exempt from registration if they do not provide funds or control EWA provider activities.

• Fee Regulations: Charges include gratuities and expedited payment fees.

• Reporting Requirements: EWA providers must report their gross income from EWA products provided to California residents, including fees from bundled services. Annual reporting to the DFPI must include details on collection attempts from employees’ bank accounts.

Business Considerations

• Employers should ensure that any EWA providers they partner with are registered with the California Department of Financial Protection and Innovation (DFPI) and comply with the new regulatory requirements.

• Employers should review and understand the classification of EWA advances as loans under the California Financing Law (CFL) to ensure their payroll practices align with state regulations.

• Employers should monitor the compliance of EWA providers with the DFPI’s reporting requirements, including the accurate reporting of gross income and collection attempts, to avoid potential legal issues.

Source References

• CA PRO 01-21 – CCFPL, CFL, CDDTL, and SLSA – Registration Requirements under the CCFPL

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.