Wisconsin Becomes Third State to Enact Law Regulating Earned Wage Access Services

Following Nevada and Missouri in 2023, Wisconsin has become the third state (and the first in 2024) 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 (AB 574) was enacted on March 21, 2024 and published on March 22, 2024. Wisconsin’s law imposes licensing and other substantive requirements on providers, and it provides important regulatory certainty for these innovative financial services in the state. Along with Nevada’s and Missouri’s laws, Wisconsin’s law may shape similar legislation in other states.

Licensing and Exemptions

The law prohibits a person from providing earned wage access services consumer without obtaining a license from Wisconsin’s financial services regulator, the Division of Banking. Among other details, applicants must submit to the division information about the applicant; its partners, members, officers, and directors; and any other information the division deems necessary to evaluate their and the applicant’s character, general fitness, and financial responsibility, so as to warrant a  belief that the provider’s business will be operated in compliance with the new law. Registration on the Nationwide Multistate Licensing System & Registry is required. An applicant must post a surety bond. There will be initial licensing and annual renewal fees to be established by the division. The licensing requirement does not apply to banks, savings and loan associations, trust companies, credit unions, or any of their affiliates.

Notices of Changes

Within 15 days of a material change, a provider must update the information provided in its license application. A license cannot be assigned, except with the division’s approval or by operation of law in connection with certain mergers or conversions.

Division’s Powers

The division may enforce the new law, and it may investigate and examine providers of earned wage access services and their offices and records and examine persons under oath in connection with such an investigation. The division may also engage in rulemaking, impose penalties, seek temporary restraining orders without notice to the adverse party, and take other disciplinary actions.

Annual Reports

On or before July 1 each year, a provider must submit an annual report to the division relating to the earned wage access services provided by the provider in the state during the preceding year.

Conduct Requirements

The law imposes substantive conduct requirements on providers required to be licensed, including:

• Free option. Providers must offer and clearly explain how to elect at least one reasonable option for a consumer to obtain the provider’s earned wage access services at no cost to the consumer, provided that this requirement first applies to customer contracts entered into on the law’s effective date.
• 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.
• Compliance with other laws. Providers must comply with all local, state, and federal privacy and information security laws, and providers who seek payment from 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 immediately prior to each transaction that a tip amount may be zero and is voluntary
  • Clearly and conspicuously disclose in their service contract with the consumer and elsewhere 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
  • Refrain from misleading or deceiving consumers about the voluntary nature of tips
  • Refrain from making representations that tips will benefit any specific individuals
• Delivery methods. Providers may provide proceeds to a consumer by any means mutually agreed upon by the consumer and provider.
• Overdraft fees. A provider that seeks payment from 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 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.
• No credit scores. Providers may not use a consumer’s credit report or credit score to determine a consumer’s eligibility for earned wage access services.
• No credit card or charge card payments. Providers may not accept payments from consumers via credit card or charge card.
• No interest or late fees. Providers may not charge late fees, deferral fees, interest, or other penalties or charges for a consumer’s failure to pay outstanding proceeds, fees, or tips.
• 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 purchaser; 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 providers of earned wage access services who are required to be licensed under the new law are exempt from the state’s consumer loan and payday loan licensing laws.

Compliance Timelines

The law generally becomes effective on the first day of the sixth month after its publication. The law directs that the division prescribe by such date an application form that will be used by providers seeking licenses. The law includes a limited grandfathering provision, which authorizes a person who, as of January 1, 2023, was engaged in the business of providing earned wage access services in the state to continue to do so without a registration until the first day of the seventh month after the law’s effective date, if that person has submitted an application for such a license and otherwise complies with the law.

Next Steps

Providers should promptly evaluate their systems, procedures, and disclosures for compliance with Wisconsin’s new requirements, given that they go into effect soon. Providers should also be prepared to apply for a license promptly once the division releases an application form. Familiarity with Wisconsin’s law is also important for industry participants because it, along with Nevada’s and Missouri’s laws, 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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