Missouri Joins States Regulating Earned Wage Access Providers

Earned wage access providers are garnering more scrutiny — and more oversight — state by state.

Missouri’s governor signed a bill that, among other things, will require providers to register with the state Division of Finance beginning in late August. The bill itself also mandates that providers are required to provide proceeds “on a non-recourse basis,” which in turn means that they are not allowed to file civil suits against borrowers, use third parties to collect debt or sell that debt to a debt buyer.

First Nevada — and Then Come Others

Nevada became the first state in the nation with a comprehensive set of rules governing earned wage access (EWA) last month after and passed its own legislation and signed it into law. Earned wage access providers are also required to register with the state.

“Applicants will be subjected to background checks, disclosure of leadership or shareholder status, financial histories, among other types of information,” per the Nevada bill. “If an applicant is approved, the EWA provider will be subject to several consumer-friendly requirements. For example, EWA providers will be required to provide clearly at least one option for a user to obtain their wages at no cost.”

Other states such as New Jersey have introduced frameworks designed to create requirements for the providers, mandating, for example, that they verify income and that data not be shared without a consumer’s consent. California has several memorandums of understanding with providers in place but its own regulations may be on the horizon.

PYMNTS data showed that against a backdrop where more than a third of U.S. consumers lack the financial wherewithal to cover a $400 emergency expense, EWA allows workers to withdraw their wages instantly. Otherwise, they would have to wait through the traditional two-week payment cycle or resort to payday loans, where interest rates can be in the triple-digit percentage points, measured annually. Ninety-three percent of workers said they believe they are entitled to earned wages at the end of each day or shift.

There’s a positive ripple effect that can accrue to the enterprises that offer the payment option, as 78% of individuals said that EWA would increase their loyalty to their employers. And EWA may become a competitive differentiator, as 81% of workers would take a job with EWA over a job that did not offer this benefit.

The landscape is heating up a bit, as earlier this year, provider Rain raised $116 million to bolster its platform, which enables employers to offer workers on-demand pay. Late last year, ADP added EWA to its platform. Additionally, 7 out of 10 middle-market companies are offering EWA to some employees, and another 24% are planning to implement it in the future.