Missouri Becomes Second State To Enact Law Regulating Earned Wage Access Services

Following closely behind Nevada, Missouri has become the second state to enact a law that establishes a financial services oversight regime for earned wage access services (also known as on-demand pay services), which allow workers to access earned but unpaid income before payday. The legislation (SB 103) was signed by the governor on July 7, 2023. Missouri’s law imposes registration and other substantive requirements on providers, and it provides important regulatory certainty for these innovative financial services in the state. Along with Nevada’s law, Missouri’s law may shape similar legislation in other states.

Registrations and Exemptions

The law prohibits a person from engaging in the business of a provider of earned wage access services without registering with Missouri’s financial services regulator, the Missouri Division of Finance within the Department of Commerce and Insurance. Among other details, registrants must submit to the director of the division of finance information about the registrant; its corporate officers, directors, principals, and partners; and a sworn statement that the provider is financially capable of engaging in the business of providing earned wage access services and, if the provider is a corporation, that the corporation is authorized to transact business in Missouri. Material changes to a registrant’s information also must be submitted to the director. Annual registration fees will be $1,000. A registration cannot be transferred or assigned without the director’s approval.

The law’s requirements do not apply to banks and savings and loan associations whose deposits or accounts are eligible for insurance by the Federal Deposit Insurance Corporation and their subsidiaries; credit unions; or persons authorized to make loans under the laws of Missouri or the United States and who are subject to regulation and supervision by Missouri or the United States.

Division’s Powers

To make necessary investigations, the director may examine the registrant and other persons having personal knowledge of the matters under investigation and may compel the production of relevant documents and records. The division may also engage in rulemaking, impose penalties (including administrative fines of up to $1,000 per day), and take other disciplinary actions.

Conduct Requirements

The law imposes substantive conduct requirements on providers, including:

• No Credit Reports. Providers may not use credit reports or credit scores to determine a consumer’s eligibility for earned wage access services
• Consumer Disclosures. Before entering into an agreement with a consumer, a provider must inform the consumer of his or her rights under the agreement and fully and clearly disclose all fees associated with the earned wage access services
• Delivery Methods. Providers may provide proceeds to a consumer by any means mutually agreed upon by the consumer and provider
• Compliance with Other Laws. Providers must comply with all local, state, and federal privacy and information security laws, and providers who seek payment by debiting a consumer’s account at a depository institution must comply with the applicable provisions of the Electronic Fund Transfer Act
• Tip Disclosures. Providers who solicit, charge, or receive tips must:
  • Clearly and conspicuously disclose in their service contract with the consumer and elsewhere that that tips are voluntary and that the offering of earned wage access services (including the amount of proceeds a consumer may request and the frequency proceeds are provided to a consumer) is not contingent on whether a consumer tips or the size of the tip
  • Clearly and conspicuously disclose immediately prior to each transaction that a tip amount may be zero and is voluntary
  • Refrain from misleading or deceiving consumers about the voluntary nature of tips
  • Refrain from making representations that tips will benefit any specific, individual person
• No Interest. Providers may not charge interest for a consumer’s nonpayment
• No Credit or Charge Card Payments. Providers may not accept payments from consumers via credit card or charge card
• No Sharing Fees or Tips with Employers. Providers may not share with a consumer’s employer any fees (including expedited delivery fees and subscription or membership fees) or tips received from or charged to a consumer for earned wage access services
• Overdraft Fees. A provider who seeks payment by debiting a consumer’s account at a depository institution must reimburse the consumer’s overdraft or nonsufficient funds fees caused by the provider in certain circumstances
• No Debt Reporting or Collection. Providers may not (1) report a consumer’s nonpayment to a consumer agency or debt collector, (2) use a third party to pursue collection from a consumer, (3) sell a consumer’s outstanding amounts to a third-party collector or a debt buyer for collection, or (4) attempt to compel a consumer to pay in a suit in a court of competent jurisdiction

Relation to Other Laws

The law clarifies that earned wage access services provided by a registrant under Missouri law are not loans or money transmission and are not considered violations of laws governing the sale or assignment of, or an order for, earned but unpaid income. It also clarifies that fees (including expedited delivery fees and subscription or membership fees) and tips for such services are not considered interest or finance charges.

Compliance Timelines

The law becomes effective on August 28, 2023. The law anticipates that the director will prepare a registration form that will be used by providers to register.

Next Steps

Providers should promptly evaluate their systems, procedures, and disclosures for compliance with Missouri’s new requirements, given that they go into effect soon. Providers should also be prepared to register once the director releases a registration form. Familiarity with Missouri’s law is also important for industry participants because it, along with Nevada’s law, may shape similar legislation pending in other states. To learn more about this law and how it may affect your business or to discuss other aspects of earned wage access services, please contact Alexander J. Callen at acallen@goodwinlaw.com or 202-346-4161.

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