Connecticut Limits Earned Wage Access Amounts, Employee Charges (2)

Connecticut is the latest state to regulate earned wage access by classifying it as a small loan, under a bill effective Oct. 1.

Employees and independent contractors can receive a small loan in the form of earned wage access, the collateral for which is their earned but unpaid wage or salary income for a given pay period, under SB 1396. The loan is considered an advance on an individual’s earned but unpaid income, and providers can generally add an additional finance charge for each advance.

Connecticut limits advance amounts to $750, under the bill. The advance amount must also not be greater than a borrower’s earned but unpaid income for a pay period. Providers are responsible for verifying a borrower’s earned but unpaid income through payroll data from their employer or data that the borrower authorizes the provider to access.

Finance charges may not exceed $4 per advance or $30 per month, under the bill. If a provider uses a finance charge, the provider must only allow one advance per pay period, the amount of which may be over 75% of the borrower’s earned but unpaid income. Finance charges may not be shared with an employer, and providers may not charge late fees, deferral fees, interest, or other penalty charges.

Advances must generally be repaid through a single repayment that occurs on the date of the borrower’s next schedule paycheck or direct deposit payment from their employer, under the bill. Repayment must be generally made within 34 days after the advance is given to a borrower. However, if the borrower lacks the funds to complete the repayment, the provider must reschedule the repayment to be made in no more than three separate installments.

SB 1396 also establishes licensing requirements for providers and incorporates consumer protections for borrowers, such as prohibiting unsolicited calls and requiring fee and charge disclosures for borrowers. Providers must offer at least one method for receiving advances at no cost to borrowers, under the bill.

The Senate Banking Committee sponsored the bill to protect individuals using earned wage access while encouraging personal finance management, according to a bill report. The Connecticut Department of Labor noted in the same report that the legislation could impact the state’s wage statutes and that payroll deductions relating to earned wage access require written authorization, as the department detailed in previously released guidance.

Gov. Ned Lamont (D) signed SB 1396 into law on July 8. Connecticut is the sixth state in 2025 to enact an earned wage access law, after Arkansas, Indiana, Louisiana, Maryland, and Utah.

(Amended to clarify effective date of SB 1396 and note that the governor signed the bill on July 8.)