On February 15, Massachusetts became the latest state to introduce legislation to regulate earned wage access (EWA) products and services. House Bill (HB) 4456 would create a new chapter to the Massachusetts Code explicitly stating that EWA services offered under the new chapter are not loans or other form of credit or debt, and voluntary tips or gratuities are not interest or finance charges. It further requires EWA providers to be licensed and provide mandatory disclosures to consumers. The bill is pending before the Joint Financial Services Committee.

HB 4456 would apply to both direct-to-consumer EWA services and employer-integrated EWA services. In either case, the amount being provided to the consumer must be earned by the consumer at the time of the advance.

EWA providers must be licensed to offer EWA services in the state and the bill provides for Massachusetts participating in a multi-state EWA licensing system for the sharing of regulatory and application information.

The bill would require an EWA provider to:

• Develop policies to respond to questions raised by consumers in an expedient manner.
• Offer at least one option to obtain funds at no cost and clearly explain how to elect that option.
• Disclose all fees associated with the EWA product.
• Inform the consumer of any material changes to the terms and conditions of the EWA product before implementing the change.
• Allow the consumer to cancel the EWA service at any time, without incurring a fee.
• Disclose, both in the contract and immediately before each transaction, that tips and gratuities are voluntary and that the offering of EWA services is not contingent on a tip.
• Provide proceeds to a consumer by any mutually agreed-upon means.
• Comply with applicable provisions of the federal Electronic Fund Transfer Act.
• Reimburse the consumer for any overdraft or nonsufficient funds fees caused by the provider attempting to seek payment on a date before, or in an incorrect amount from, the date or amount disclosed to the consumer.

The bill also prohibits providers from:

• Compelling a consumer to repay by use of unsolicited telephone calls, filing a suit against the consumer, using a third-party collection agency, or selling outstanding amounts to a third-party collector.
  • This prohibition does not apply to providers seeking to collect any outstanding amount incurred through fraud, or to actions against an employer for breach of contract.
• Sharing with a consumer’s employer any fees or tips received from or charged to a consumer.
• Using credit reports or credit scores to determine a consumer’s eligibility for EWA services.
• Reporting a consumer’s nonpayment to a consumer reporting agency or debt collector.
• Imposing late fees, deferral fees, interest, or any other charge for failure to pay any outstanding proceeds, fees, or tips.
• Accepting payment from a consumer via credit card.
• Misleading consumers about the voluntary nature of the tips or gratuities or representing that the tips or gratuities will benefit specific individuals.

At a date to be determined by the commissioner, a licensed EWA provider will also be required to submit an annual report that includes information about its operations for the prior year.

HB 4456 provides that an EWA provider that was engaged in the business of providing EWA services in the state as of January 1, 2024 may continue as long as the provider submits an application for a license before January 1, 2025, and otherwise complies with the chapter.

HB 4456 explicitly does not apply to a national banking association, a federally chartered credit union, a federal savings and loan association, a federal savings bank, or any subsidiary or affiliate of the same, or to any bank, trust company, savings bank, savings and loan association, or credit union organized under the laws of any other state.