CT: Testimony in Opposition to Connecticut HB 5140

TO: The Joint Banking Committee

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

DATE: February 20, 2024

SUBJECT: House Bill 5140

Position: General Comments.

Testimony:

Thank you Co-Chairs Miller and Doucette, Vice-Chairs Santos and Cohen, and members of the Joint Committee on Banking for allowing me the opportunity to provide general comments on House Bill 5140 (HB 5140). My name is Phil Goldfeder, I am a former state legislator from New York and now continue in my public service as the CEO of the American Fintech Council (AFC).

AFC is a standards-based organization, and we represent the largest number of Earned Wage Access (EWA) providers of any trade association. As such, we have a responsibility to the industry as a whole, but even more importantly, to the consumers they serve. EWA is a safe, reliable alternative to payday and predatory loans and gives consumers the ability to access the money they have already earned on their own terms. EWA does not charge interest or late fees and does not conduct collection activity of any kind. EWA services are offered in both employer-integrated and direct-to-consumer methods. These two business models operate within the market for a very good reason, namely, they offer consumers the opportunity to use the EWA service that fits their lifestyle best. While employer-integrated EWA providers partner with employers, direct-to-consumer EWA providers seek to assist consumers who are employed by small businesses or work as independent contractors. Ultimately, the availability of both models results in the most consumers being responsibly served by EWA.

Importantly, EWA services offered through either business model are not loans and should not be regulated as such. While we support the Committee’s efforts to develop an initial licensing regime for employer-integrated EWA services, as AFC has stated previously, EWA needs a separate and distinct regulatory framework that is inclusive of both business models serving all Connecticut families. As an emerging industry we must balance the unique services being offered with the most appropriate regulatory framework that can provide clear benefits to thousands of Connecticut residents and millions nationwide. To that end, AFC has developed a specific set of standards for determining what constitutes a responsible EWA provider. In our standards, we do not distinguish between business models, because we believe that all EWA providers are able to operate in a responsible manner.

I respect the committee’s efforts to develop legislation that adequately protects consumers engaging in EWA services. However, as written, I believe HB 5140 would incorrectly bifurcate the industry. This would limit access to responsible direct-to-consumer EWA services for the very constituents this body serves, by pushing responsible providers out of Connecticut. Further, amending Connecticut’s small loan statute to include EWA services as is done in HB 5140 would require employers who offer EWA services to obtain a license. In turn, this would significantly chill even employer-integrated EWA offerings in Connecticut.

In closing, I thank you again for the opportunity to raise my concerns regarding HB 5140. My sincere hope is that we can find a path forward to draft pragmatic legislation that will establish the proper guardrails for the entire industry while allowing all responsible EWA providers to offer their much-needed services across Connecticut.