AB574: Bill Text

October 27, 2023 - Introduced by Representatives Dallman, Neylon, Allen, Dittrich, Gundrum, Murphy, Mursau, Nedweski, Novak, Rettinger, Steffen and Tusler, cosponsored by Senators Stafsholt, Tomczyk and Cowles. Referred to Committee on Financial Institutions.

AB574,,2 An Act to amend 73.0301 (1) (d) 6., 108.227 (1) (e) 6., 138.14 (3) and 220.02 (3); and to create 138.09 (1a) (c), chapter 203 and 220.02 (2) (j) of the statutes; relating to: regulating earned wage access services, granting rule-making authority, and providing a penalty.

AB574,,3 Analysis by the Legislative Reference Bureau

This bill regulates companies that provide earned wage access services in this state to individuals who reside in this state (consumers) and requires such companies to be licensed by the Division of Banking (division) in the Department of Financial Institutions before providing those services.

Under the bill, “earned wage access service” is defined as the business of delivering to consumers access to earned but unpaid income that is based on 1) the consumer’s representations and the provider’s reasonable determination of the consumer’s earned but unpaid income; or 2) employment, income, or attendance data obtained directly or indirectly from an employer. The bill defines, with exceptions, a “provider” as a business entity that is in the business of providing earned wage access services to consumers. “Earned but unpaid income” is defined as salary, wages, compensation, or other income that a consumer or an employer has represented, and that a provider has reasonably determined, has been earned or accrued to the benefit of the consumer in exchange for the consumer’s provision of services to the employer or on the employer’s behalf but has not, at the time of the payment of proceeds, been paid to the consumer by the employer. An “employer” includes a person who is obligated to pay a consumer acting as an independent contractor. “Proceeds” are defined as a provider’s payment to a consumer based on earned but unpaid income.

The bill requires a provider, before providing earned wage access services in this state, to be licensed by the division. This requirement applies even if the provider is not physically located in this state, such as when the provider conducts business by means of a website. However, these provisions do not apply to financial institutions and their affiliates. An applicant for a license must pay a fee to the division, file and maintain a surety bond, and provide specified information to the division.

The bill imposes various requirements on a licensed provider, including requiring a licensed provider to do all of the following:

1. Develop and implement policies and procedures to respond to consumer questions and complaints.

2. Offer to the consumer at least one reasonable option to obtain proceeds at no cost and explain how to elect this option.

3. Before entering into an earned wage access services agreement with a consumer, inform the consumer of his or her rights under the agreement and disclose all fees associated with these services.

4. Inform the consumer of material changes to the terms and conditions of the earned wage access services before implementing them.

5. Allow the consumer to cancel use of the provider’s earned wage access services at any time, without incurring a cancellation fee or penalty imposed by the provider.

6. If the provider solicits, charges, or receives tips, gratuities, or other donations (tips) from consumers, disclose in its service contract that tips are voluntary and the provider’s services are not contingent on tips and further disclose before each transaction that a tip is voluntary.

7. If the provider will seek repayment of proceeds remitted to the consumer but not yet repaid (outstanding proceeds) or payment of fees or other amounts from a consumer’s bank account, including through electronic funds transfer, reimburse the consumer for overdraft or non-sufficient funds fees caused by the provider’s attempted payment before the date, or in an amount different from, that disclosed to the consumer.

The bill imposes various limitations on a licensed provider, including prohibiting a licensed provider from doing any of the following:

1. Sharing consumer fees or tips with the consumer’s employer.

2. Accepting a consumer’s payment of outstanding proceeds, fees, or tips by means of a credit card.

3. Charging a late fee, deferral fee, interest, or other penalty for failure to pay outstanding proceeds, fees, or tips.

4. Reporting to a consumer reporting agency or debt collector information about the consumer’s nonpayment to the provider of outstanding proceeds, fees, or tips.

5. Compelling the consumer’s payment of outstanding proceeds, fees, or tips through a lawsuit in court, use of a third-party debt collector, or sale of the obligation to a third-party debt collector or debt buyer, unless the consumer acted through fraudulent or other unlawful means.

6. Misleading or deceiving consumers about the voluntary nature of tips or making representations that tips will benefit any specific individual.

7. Advertising, publishing, or broadcasting any statement or representation regarding the provider’s earned wage access services that is false, misleading, or deceptive.

The bill specifies that a licensed provider’s earned wage access services are not, and do not fall within the scope of current law regulation of, any of the following: 1) a payday loan, or any other form of loan or form of credit or debt; 2) the Wisconsin Consumer Act; 3) money transmission (which current law refers to as a “seller of checks” business); or 4) a violation or noncompliance with state laws governing the sale or assignment of an individual’s wages or other compensation earned or accrued but not yet paid. In addition, the bill specifies that fees and tips paid by a consumer to a provider are not considered interest or finance charges.

The bill requires a licensed provider to submit an annual report to the division that includes certain information related to the provider’s earned wage 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 license under certain circumstances and 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.

AB574,,4 The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB574,1 Section 1. 73.0301 (1) (d) 6. of the statutes is amended to read:

AB574,,6 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.

AB574,2 Section 2. 108.227 (1) (e) 6. of the statutes is amended to read:

AB574,,8 108.227 (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.

AB574,3 Section 3. 138.09 (1a) (c) of the statutes is created to read:

AB574,,10 138.09 (1a) (c) Providers of earned wage access services required to be licensed under s. 203.03 (1).

AB574,4 Section 4. 138.14 (3) of the statutes is amended to read:

AB574,,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 wage access services required to be licensed under s. 203.03 (1).

AB574,5 Section 5. Chapter 203 of the statutes is created to read:

AB574,,15 CHAPTER 203 EARNED WAGE ACCESS SERVICES

AB574,,16 203.01 Definitions. In this chapter:

AB574,,17 (1) “Business entity” means any corporation, limited liability company, partnership, association, or other commercial entity.

AB574,,18 (2) “Consumer” means an individual who resides in this state.

AB574,,19 (3) “Consumer-directed wage access services” means the business of delivering to consumers access to earned but unpaid income that is based on the consumer’s representations and the provider’s reasonable determination of the consumer’s earned but unpaid income.

AB574,,20 (4) “Division” means the division of banking.

AB574,,21 (5) “Earned but unpaid income” means salary, wages, compensation, or other income that a consumer or an employer has represented, and that a provider has reasonably determined, has been earned or accrued to the benefit of the consumer in exchange for the consumer’s provision of services to the employer or on behalf of the employer, including on an hourly, project-based, piecework, or other basis and including circumstances in which the consumer is acting as an independent contractor of the employer, but has not, at the time of the payment of proceeds, been paid to the consumer by the employer.

AB574,,22 (6) “Earned wage access service” means the business of providing consumer-directed wage access services or employer-integrated wage access services, or both.

AB574,,23 (7) (a) Except as provided in par. (b), “employer” means any of the following:

AB574,,24 1. A person who employs a consumer.

AB574,,25 2. Any other person who is contractually obligated to pay a consumer earned but unpaid income in exchange for the consumer’s provision of services to the employer or on behalf of the employer including on an hourly, project-based, piecework, or other basis and including circumstances in which the consumer is acting as an independent contractor with respect to the employer.

AB574,,26 (b) “Employer” does not include any of the following:

AB574,,27 1. A customer of an employer.

AB574,,28 2. Any other person whose obligation to make a payment of salary, wages, compensation, or other income to a consumer is not based on the provision of services by that consumer for or on behalf of the person.

AB574,,29 (8) “Employer-integrated wage access services” means the business of delivering to consumers access to earned but unpaid income that is based on employment, income, or attendance data obtained directly or indirectly from an employer.

AB574,,30 (9) (a) Except as provided in par. (b), “fee” includes any of the following:

AB574,,31 1. A fee imposed by a provider for delivery or expedited delivery of proceeds to a consumer.

AB574,,32 2. A subscription or membership fee imposed by a provider for a bona fide group of services that include earned wage access services.

AB574,,33 (b) “Fee” does not include a voluntary tip, gratuity, or other donation.

AB574,,34 (10) “Licensee” means a business entity that is licensed by the division under s. 203.03 (1) as an earned wage access services provider.

AB574,,35 (11) “Nationwide mortgage licensing system and registry” has the meaning given in 12 USC 5102 (6).

AB574,,36 (12) “Outstanding proceeds” means proceeds remitted to a consumer by a provider that have not yet been repaid to the provider.

AB574,,37 (13) “Proceeds” means a payment in U.S. dollars to a consumer by a provider that is based on earned but unpaid income.

AB574,,38 (14) (a) Except as provided in par. (b), “provider” means a business entity that is in the business of providing earned wage access services to consumers.

AB574,,39 (b) “Provider” does not include any of the following:

AB574,,40 1. A service provider, such as a payroll service provider, whose role may include verifying the available earnings but that is not contractually obligated to fund proceeds delivered as part of an earned wage access service.

AB574,,41 2. An employer that offers a portion of salary, wages, or compensation directly to its employees or independent contractors prior to the normally scheduled pay date.

AB574,,42 203.02 Powers of the division. (1) The division may issue any general or special order in execution of or supplementary to this chapter.

AB574,,43 (2) The division may promulgate such rules as it considers necessary for the administration of this chapter.

AB574,,44 (3) The division has the same power to conduct hearings, take testimony, and secure evidence as is provided in ss. 217.17 and 217.18.

AB574,,45 (4) The division for the purpose of discovering violations of this chapter may investigate the business of a licensee that is transacted under this chapter and shall investigate convictions reported to the division by any district attorney for violation by a provider of this chapter. The place of business, if any, books of account, papers, records, safes, and vaults of a licensee shall be open to inspection and examination by the division for the purpose of such investigation, and the division may examine under oath all persons whose testimony the division may require relative to such investigation.

AB574,,46 (5) The cost of any investigation, examination, or hearing, including witness fees or any other expenses, conducted by the division under this chapter involving a provider shall be paid by the provider within 30 days after demand therefor by the division, and the state may maintain an action for the recovery of such costs and expenses.

AB574,,47 (6) Actual costs incurred by the division to examine books and records maintained outside this state shall be paid by the provider.

AB574,,48 203.03 Licensure. (1) (a) Subject to par. (b), a provider, including a provider that is not physically located in this state, may not provide earned wage access services in this state unless the provider has been issued a license by the division.

AB574,,49 (b) This section does not apply to banks, savings banks, savings and loan associations, trust companies, credit unions, or any of their affiliates.

AB574,,50 (2) A provider required to be licensed under sub. (1) shall apply to the division for a license on a form and in the manner prescribed by the division. The application shall include all of the following information:

AB574,,51 (a) The name of the provider.

AB574,,52 (b) The name under which the provider transacts business, if different from par. (a).

AB574,,53 (c) The address of the provider’s principal office, which may be outside this state.

AB574,,54 (d) The addresses of all of the provider’s offices or retail stores, if any, in this state.

AB574,,55 (e) If the provider provides earned wage 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 wage access services.

AB574,,56 (f) The address of the provider’s designated agent upon whom service of process may be made in this state.

AB574,,57 (g) The provider’s federal employer identification number.

AB574,,58 (h) Any other similar information the division requires to administer this chapter.

AB574,,59 (3) In addition to the application under sub. (2), each licensee shall register with, and maintain a valid unique identifier issued by, the nationwide mortgage licensing system and registry.

AB574,,60 (4) Each provider required to be licensed under sub. (1) shall update any information provided in its license application within 15 business days after a material change in that information.

AB574,,61 (5) A provider that submits an application for a license under sub. (2) shall pay a nonrefundable fee to the division determined in accordance with rates set by the division. In setting the rates, the division shall determine the amount of fees needed to provide sufficient funds for the division to meet the budget requirements of administering and enforcing this chapter in each fiscal year.

AB574,,62 (6) (a) A provider required to be licensed under sub. (1) shall file with the division, and maintain in force, a surety bond that is issued by a surety company admitted to do business in this state that meets all of the following requirements:

AB574,,63 1. The bond is in an amount equal to $25,000.

AB574,,64 2. The bond is in favor of the state for the benefit of any person that is damaged by a violation of this chapter.

AB574,,65 3. The bond is in favor of any person that is damaged by a violation of this chapter.