On March 21, Wisconsin Democrat Governor Tony Evers signed into law the country’s third earned wage access (EWA) bill, which recognizes EWA as a new and innovative financial service by creating a distinct license and oversight system for the product.

Modeled after the gold-standard legislation enacted in Nevada last year – which was subsequently endorsed by the Council of State Governments (CSG) as model innovative legislation – the Wisconsin bill encodes several important consumer protections for Wisconsinites:

1. EWA will always be non-recourse: The bill ensures there will never be any recourse against the consumer in an EWA transaction.
2. It places new protections on fees: The bill bans late fees, interest, and other penalties, so consumers will never pay those fees in an EWA transaction.
3. Requires providers to offer a free option: The bill requires EWA providers to offer a free option to users, such as an ACH bank transfer or instant transfer to a provider’s debit card. This is a widely used option by consumers, and this requirement ensures consumers will always have free access to their earned but unpaid wages as an option.
4. It creates clear disclosure requirements: The bill ensures that any fees charged will have clear, transparent disclosures so the consumers are aware of any fee and costs.
5. Protections against overdraft charges: While employer-integrated EWA does not create a risk of overdraft, as the EWA transaction is adjusted through the paycheck, the bill protects users of direct-to-consumer products in the event debiting their account causes overdraft.
6. Creates a new EWA license: The bill creates a new licensing process for EWA providers through Wisconsin’s Department of Financial Institutions, which is expected to begin in the coming months.

Wisconsin joins a growing number of states that have put forward clear regulatory guidance related to EWA services – including Nevada and Missouri – which passed similar licensing and registration legislation last year. Attorneys General in Arizona and Montana have also released formal opinions reaffirming EWA is not a loan. This regulatory clarity provides guardrails around which the industry can grow and innovate, and streamlines the onboarding process with employers wishing to offer EWA as an employee benefit.

Only one state – Connecticut – has taken a contrary position. As a result, most providers have either pulled out of the state or have significantly reduced their offerings. Unfortunately, thousands of workers in the state of Connecticut have lost access to EWA as a result. Former EWA users estimate their financial health is worse off as a result of this change, and one provider noted their user’s overdraft fees have increased by 10 percent since their users lost access to EWA. In response, state legislators have introduced a bill seeking to provide regulatory clarity and restore access to EWA for the state’s residents.

Alongside the 5 states that have released clear EWA guidance for a collective 24 million consumers, over 10 additional states have introduced similar legislation to create a tailored oversight system for EWA providers and encode important consumer protections and industry best practices.

As legislators and regulators increasingly recognize the value of EWA as an alternative to high-cost debt products like payday loans, online payday loans, bank account overdraft, and credit card debt, it is expected that similar legislation will continue to gain momentum.