the payday loan industry saw opportunity to brand a different approach under the umbrella of EWA. These new programs shunned employer integration, relying on workers to give their pay data information. These non- integrated, or direct-to-consumer, providers claimed their programs were not credit. So, there now exists two camps of EWA: Employer-integrated EWA operators and those providing direct-to-consumer, non- integrated models. The startup employer-integrated EWA providers generally were not supportive of the direct-to- consumer approach. Lacking independent lobbying power, however, these providers often found themselves overshadowed by non-integrated players who possessed deep legislative influence but faced higher risks of being classified as loan products. In several instances, both types of EWA joined forces in successfully getting states to craft laws that would legitimize EWA, not call the process a loan, and set up guardrails for consumer protection. Since 2023, at least a dozen states have passed laws covering both types of EWA, often delineating between the two models.
If EWA amounts are considered “wages,” and the volume of EWA payouts is high enough, they could trigger a faster schedule for employment tax remittances than the normal pay day.
Federal authorities first welcomed the practice as a refreshing, unique non-loan way employees can access funds that they earned (with non-integrated offerings more likely to be loans), then pivoted to support the consumer groups’ contention that most EWA programs were loans, and now have gone back the other way to favoring the practice as generally a non-loan financial transaction. The Current State Despite these challenges, the popularity of EWA continues to grow at a robust pace. Well-run programs have high take-up rates amongst workers. More employers have added EWA to their benefit mix and continue to see positive employee retention and recruitment results after implementation. Some consider
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ISSUE 23 GLOBAL PAYROLL MAGAZINE
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