Arkansas Becomes Seventh State to Regulate Earned Wage Access

Arkansas has become the seventh state in recent years to regulate earned wage access services, under a bill that will go into effect 90 days after the state legislature adjourns.

Earned wage access services enable employees to receive a portion of their earned but unpaid income prior to their regularly scheduled payday, said House Rep. David Ray (R), the sponsor of HB 1517, on March 5. Providers of earned wage access services can offer their services to both employers and employees.

The United States has roughly 30 companies that provide earned wage access services, Ray added.

Unlike similar laws in other states, like Nevada, HB 1517 does not require providers to be registered or licensed with the state before providing earned wage access services to Arkansas residents.

Providers must offer employees at least one free option of accessing proceeds that represent their earned but unpaid income, under HB 1517. However, providers can also charge fees, such as a charge for the expedited delivery of funds or a subscription charge. They may also solicit tips from employees.

The average fee amount for earned wage access services is about $3.18 according to the federal Consumer Financial Protection Bureau, said Phil Goldfeder, chief executive officer of the American Fintech Council, on March 5 in support of the bill. The AFC is a trade group that represents earned wage access service providers.

HB 1517 contains consumer protections for employees using earned wage access services. For example, providers must disclose all fees to employers and employees, allow individuals to cancel use of the services without a cancellation fee, and comply with all relevant information security laws.

Additionally, providers must reimburse employees for any overdraft fees caused by their attempt to collect outstanding payments, under the bill. They may not charge late fees, deferral fees, interest, or other penalties or charges for failing to pay outstanding amounts.

“The first question I get asked a lot when I explain this issue is if this is a payday loan. The answer to that is no. Earned wage access differs in some very significant ways. For one, it is not a loan based on future wages that are not actually worked for,” said Ray. “In fact, not only is earned wage access not a loan, it is actually the opposite or alternative to a loan.”

Earned wage access services could also reduce employee turnover and absences for employers, according to a report by the Federal Reserve Bank of Kansas City, Ray added.

Gov. Sarah Huckabee Sanders (R) signed HB 1517 into law on March 20.

Other states currently regulating EWA include California, Kansas, Missouri, Nevada, South Carolina, and Wisconsin.