WI: Testimony in Support of Wisconsin AB 574

TO: The Assembly Committee on Financial Institutions

FROM: Hon. Phil Goldfeder, CEO, American Fintech Council

DATE: November 1, 2023

SUBJECT: Assembly Bill 574 (Earned Wage Access)

Position: Support.

Testimony:

Thank you Chair Duchow, Vice-Chair O’Connor, and members of the Assembly Committee on Financial Institutions for providing me the opportunity to testify before you in support of Assembly Bill 574 (AB 574). My name is Phil Goldfeder, and I am the CEO of the American Fintech Council (AFC). As a former member of the New York State Assembly, I understand how difficult it is to craft legislation for nascent financial industries and thank you for being one of the earliest states in the country to recognize that Earned Wage Access is a critical lifeline for many of your constituents and families across Wisconsin.

Our mission at AFC is to promote an innovative, transparent, inclusive, and customer-centric financial system by supporting responsible innovation in financial technology (Fintech) and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. We proudly represent the largest Earned Wage Access companies serving millions of consumers and families across the United States.

EWA is a payroll innovation that enables workers to access wages they have already earned when they need it and serves as an important alternative to arbitrary pay periods and high-cost predatory options. Estimates of the EWA market size suggest that in the United States’ the EWA industry is serving millions of workers nationwide. Further, data from an AFC member finds that the average amount of earned wages accessed by most consumers is about $115 to $150, once a pay period. Most users access their wages to pay bills that come with late fees, like utility bills, credit card bills, and childcare; and typically utilize one platform for about three months.

Simply put, EWA is not a loan and should not be regulated as such. Unlike a loan, EWA services provide employees access to wages they have already earned prior to their arbitrary biweekly or monthly pay period when they are short on funds between paychecks. Responsible and affordable EWA companies are democratizing financial services and disrupting broken legacy systems that have historically put consumers at a disadvantage.

As the trade association representing the largest EWA providers, AFC has worked tirelessly to promote and advocate for EWA industry best practices and consumer protections, including strong transparency and disclosures, non-recourse, no interest, late fees or penalties, no debt collection, no credit reporting, no collection activity of any kind, and a requirement that a “no cost” option be offered to all EWA users While some may claim that EWA services act the same as loans in practice and should fall under the jurisdiction of existing lending laws, lending laws are predicated on the specific features of the service, not how they serve a consumer’s needs. To attempt to assimilate EWA services into the existing lending regulatory framework would place unnecessary and inapplicable requirements on EWA providers that would ultimately make their services unviable for Wisconsin families.

The provisions of AB 574 properly balance responsible innovation with a pragmatic, consumer protected regulatory framework that fits the EWA industry. This new legislation establishes clear standards for acceptable EWA services regulated under its licensing regime in a manner that reflects the nuances and optionality of the EWA industry while also protecting consumers from irresponsible actors.

Establishing the regulatory framework enumerated in AB 574 would allow EWA services to flourish in Wisconsin and help workers access the pay they are entitled to instantly. AFC has publicly advocated for a clear and consistent regulatory framework for EWA that avoids duplicative or diverging requirements and accurately reflects the nuances of the financial service. Passing AB 574 would ensure that this regulatory aim is met in Wisconsin and directly benefit Wisconsinites by giving EWA providers a clear and functional regulatory path to offer their services most effectively.

In closing, I thank you again for the opportunity to offer my support for AB 574. I appreciate your consideration of this bill and am happy to answer any questions you may have.