Maryland Earned Wage Access Law Bucks Trend (1)

Earned wage access in Maryland is considered a loan subject to the state’s Consumer Loan Law, under a bill that became law May 25 and will go into effect Oct. 1.

Third parties offering earned wage access services must be licensed under the Consumer Loan Law because the state considers it to be a type of loan or extension of credit, under HB 1294. This differs from other states with earned wage access laws, such as Nevada, which generally do not treat earned wage access as a loan or form of credit.

Maryland recognizes two types of earned wage access under the bill. Employer-integrated earned wage access is defined as a system based on a contract between a third party and an employer that allows employees to receive proceeds in advance of their regular payday based on employment and income data obtained from the employer or its payroll service provider. In contrast, consumer-directed earned wage access is provided directly to employees by third parties without a relationship to their employers, and employees provide their employment and income data to the provider to determine the amount of payment they can receive.

South Carolina is one of the only other states that explicitly recognizes this distinction in its earned wage access law.

Third parties offering earned wage access can receive payment from employees using their services in the form of tips and fees, but HB 1294 places unprecedented restrictions on the amounts that can be collected compared to all other state earned wage access laws.

The bill sets the maximum fee amount for expedited delivery of earned wage access at $5 if the amount advanced is up to $75 and $7.50 if the amount advanced is more than $75. Providers may not charge late fees, cancellation fees, interest, or penalties. HB 1294 is the first state earned wage access that explicitly includes maximum fee limits for expedited delivery.

“Most EWA providers offer instant delivery of earned wages to a bank account for a flat, one-time fee of around $3,” according to testimony from Claudia Flores, director of public policy for DailyPay, an earned wage access provider supporting the bill.

The bill allows third parties to request tips from employees, but the default amount must be zero and employees must be informed that the tip will not influence the third party or the terms of earned wage access. In testimony provided by the Maryland Department of Labor’s Office of Financial Regulation, which enforces the Consumer Loan Law, the office said it found the practice of tipping within the earned wage access industry anticompetitive, with most providers receiving nothing in tips while a few receive millions of dollars in tips in Maryland annually.

Additionally, tips and fees are considered a form of interest under the Consumer Loan Law, so third parties must return any tips within 30 days of receiving them if they would raise the interest rate above the amount permitted under the law. The Office of Financial Regulation noted in its testimony that many earned wage access services that are marketed as affordable tend to contain high fees and hidden costs, including tips, which can exceed the 33% maximum annual interest rate permitted under the Consumer Loan Law.

HB 1294 also establishes various protections for employees using earned wage access, including by requiring the full disclosure of all fees, the right to at least one free method of using earned wage access services, and their ability to cancel at any time without cost.

The bill became law May 25 without the signature of Gov. Wes Moore (D). Maryland is the fourth state in 2025 to enact an earned wage access law, after Utah, Arkansas, and Indiana.

(Adds reference to Indiana act.)