AB1099: Bill Text

LRB-1393/1

KRP:cdc&wlj

2021 - 2022 LEGISLATURE

2021 Assembly BILL 1099

March 10, 2022 - Introduced by Representatives Neylon and Allen. Referred to Committee on Ways and Means.

AB1099,1,4 An Act to amend 73.0301 (1) (d) 6., 108.227 (1) (e) 6. and 138.14 (3); and to create 138.09 (1a) (c) and chapter 203 of the statutes; relating to: regulating earned income access services, providing a penalty, and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill regulates persons that provide earned income access services in this state to individuals who reside in this state (consumers) and requires such persons to register with the Division of Banking (division) in the Department of Financial Institutions before providing those services.

Under the bill, “earned income access service” is defined as “the business of delivering proceeds to consumers before the date on which obligors are obligated to pay salary, wages, or other benefits.” A person other than an individual that is in the business of providing earned income access services to consumers is a “provider.” The bill defines “proceeds” as “the amount of earned but unpaid income that a provider provides to a consumer,” and “earned but unpaid income” is defined as “money that is based on wages, compensation, or other income that a consumer represents, and that a provider determines, has been earned by or has accrued to the benefit of the consumer but that has not, at the time the proceeds are provided, been paid to the consumer by an obligor.” The bill defines “obligor” as “an employer, independent contractor, or other person that is legally obligated to pay a consumer a sum of money on an hourly, project-based, piecework, or other basis,” but “obligor” does not include “the customer of an obligor or a 3rd party that has an obligation to make a payment to a consumer based solely on the consumer's agency relationship with the obligor.”

Under the bill, a provider that wants to provide earned income access services in this state must apply to the division for a certificate of registration, pay a registration fee, and do all of the following:

1. Supply certain information to the division, including the addresses of the provider's offices or retail stores in this state and, if the provider provides earned income access services at a location that is not an office or retail store in this state, a brief description of the manner in which the provider provides earned income access services.

2. Notify the division of any material changes in the information supplied to division.

3. File with the division and maintain in force a surety bond or irrevocable letter of credit in the amount of $25,000 for the purpose of protecting consumers or other persons that may be damaged if the provider does not comply with the regulations created in the bill.

4. Conspicuously post the provider's certificate of registration at the provider's physical place of business or, if the provider conducts business on an Internet site, post the provider's registration number on the Internet site.

Under the bill, the division generally must issue a certificate of registration to a provider if the division finds that the character and general fitness and the financial responsibility of the provider warrant the belief that the provider will operate its business in compliance with the regulations created in the bill. The bill requires the division to deny registration if the provider is liable for delinquent taxes or unemployment insurance contributions. A registered provider must pay an annual registration fee.

If a provider is required to register under the bill, the bill imposes various requirements and limitations on the provider in connection with providing earned income access services in this state to consumers, including all of the following:

1. The provider must provide proceeds to consumers on a nonrecourse basis.

2. Each time the provider provides proceeds to a consumer, the provider must inform the consumer when the provider will make its first attempt to collect repayment of those proceeds from the consumer.

3. If the provider attempts to collect repayment of proceeds from a consumer's depository institution account, the provider must comply with applicable National Automated Clearinghouse Association rules.

4. The provider may not charge a consumer a late fee or any other monetary penalty if the consumer fails to repay proceeds.

5. The provider may not require a consumer to make a “mandatory payment,” which the bill defines as “an amount the provider determines a consumer must pay to the provider as a condition of receiving proceeds.”

6. The provider must, before providing proceeds to a consumer, inform the consumer in writing of any “nonmandatory payments” that may be associated with the provider providing earned income access services to consumers. The bill defines “nonmandatory payment” as “an amount paid by a consumer or an obligor to a provider that is not a mandatory payment,” for example, a tip or gratuity a consumer pays to the provider.

7. The provider may collect a nonmandatory payment from a consumer, but the provider may not condition the amount of proceeds, or the frequency with which the provider provides proceeds, based on the amount of the consumer's nonmandatory payment.

The bill provides that current state laws that regulate persons that originate or service payday loans do not apply to registered providers, and current laws that regulate licensed lenders, which are certain lenders licensed by the division that assess finance charges greater than 18 percent for consumer loans, do not apply to registered providers. The bill also provides that the Wisconsin Consumer Act does not apply to proceeds. Under current law, the Wisconsin Consumer Act grants consumers certain rights and remedies and contains notice and disclosure requirements and prohibitions relating to consumer credit transactions that are entered into for personal, family, or household purposes. The bill also specifies that 1) proceeds provided in compliance with the regulations created in the bill are not considered credit and a registered provider that provides proceeds is not considered a creditor; and 2) nonmandatory payments by a consumer are not considered a finance charge under the federal Truth in Lending Act.

The bill requires a registered provider to submit an annual report to the division that includes certain information related to the provider's earned income access services in this state and to keep certain books and records. The bill gives the division the right to suspend or revoke a provider's certificate of registration under certain circumstances, including if the provider fails to pay the annual registration fee, fails to maintain the required bond or letter of credit, or makes a material misstatement to the division. The bill provides the division with certain authority to enforce the regulations created in the bill.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB1099,1 Section 1. 73.0301 (1) (d) 6. of the statutes is amended to read:

AB1099,3,5 73.0301 (1) (d) 6. A license or certificate of registration issued by the department of financial institutions, or a division of it, under ss. 138.09, 138.12, 138.14, 202.12 to 202.14, 202.22, 203.03, 217.06, 218.0101 to 218.0163, 218.02, 218.04, 218.05, 224.72, 224.725, 224.93 or under subch. IV of ch. 551.

AB1099,2 Section 2. 108.227 (1) (e) 6. of the statutes is amended to read:

AB1099,4,4 108.227 (1) (e) 6. A license or certificate of registration issued by the department of financial institutions, or a division of it, under ss. 138.09, 138.12, 138.14, 202.12 to 202.14, 202.22, 203.03, 217.06, 218.0101 to 218.0163, 218.02, 218.04, 218.05, 224.72, 224.725, 224.93 or under subch. IV of ch. 551.

AB1099,3 Section 3 . 138.09 (1a) (c) of the statutes is created to read:

AB1099,4,7 138.09 (1a) (c) Providers of earned income access services required to register under s. 203.03 (1).

AB1099,4 Section 4 . 138.14 (3) of the statutes is amended to read:

AB1099,4,12 138.14 (3) Exemptions. This section does not apply to banks, savings banks, savings and loan associations, trust companies, credit unions, or any of their affiliates or to providers of earned income access services required to register under s. 203.03 (1).

AB1099,5 Section 5. Chapter 203 of the statutes is created to read:

AB1099,4,15 CHAPTER 203 earned income access services

AB1099,4,16 203.01 Definitions. In this chapter:

AB1099,4,17 (1) “Consumer” means an individual who resides in this state.

AB1099,4,18 (2) “Division" means the division of banking.

AB1099,4,23 (3) “Earned but unpaid income” means money that is based on wages, compensation, or other income that a consumer represents, and that a provider determines, has been earned by or has accrued to the benefit of the consumer but that has not, at the time the proceeds are provided, been paid to the consumer by an obligor.

AB1099,5,3 (4) “Earned income access service” means the business of delivering proceeds to consumers before the date on which obligors are obligated to pay salary, wages, or other benefits.

AB1099,5,5 (5) “Mandatory payment” means an amount a provider determines a consumer must pay to the provider as a condition of receiving proceeds.

AB1099,5,8 (6) “Nonmandatory payment” means an amount paid by a consumer or an obligor to a provider that is not a mandatory payment. “Nonmandatory payment” includes any of the following:

AB1099,5,11 (a) A fee imposed by the provider for delivery or expedited delivery of proceeds to the consumer, as long as the provider offers the consumer at least one option of receiving proceeds at no cost.

AB1099,5,13 (b) An amount paid by the obligor to the provider on the consumer's behalf that entitles the consumer to receive proceeds at no cost to the consumer.

AB1099,5,16 (c) A subscription or membership fee imposed by the provider for a group of services that includes earned income access services, as long as the provider offers the consumer at least one option of receiving proceeds at no cost.

AB1099,5,18 (d) A tip or gratuity paid by the consumer to the provider, as long as the provider offers the consumer at least one option of receiving proceeds at no cost.

AB1099,5,21 (7) (a) “Nonrecourse" means that a provider may not compel or attempt to compel repayment by a consumer of outstanding proceeds or nonmandatory payments owed by the consumer to the provider using any of the following means:

AB1099,5,22 1. A civil suit against the consumer in court.

AB1099,5,24 2. Using a 3rd party to pursue collection of outstanding proceeds or nonmandatory payments on the provider's behalf.

AB1099,5,25 3. Selling the debt to a 3rd-party collector or debt buyer.

AB1099,6,4 (b) “Nonrecourse” does not include the use by a provider of any of the means described under par. (a) 1. to 3. to compel or attempt to compel repayment of outstanding proceeds or nonmandatory payments incurred by a consumer through fraudulent means.

AB1099,6,9 (8) “Obligor” means an employer, independent contractor, or other person that is legally obligated to pay a consumer a sum of money on an hourly, project-based, piecework, or other basis. “Obligor” does not include the customer of an obligor or a 3rd party that has an obligation to make a payment to a consumer based solely on the consumer's agency relationship with the obligor.

AB1099,6,11 (9) “Outstanding proceeds” means proceeds provided to a consumer by a provider but not yet repaid to the provider.