American Fintech Council Testimony in support of NCOIL Model EWA Bill

TO:                     NCOIL

FROM:               Hayden Cole, Director of Federal Government Affairs, AFC

DATE:                 November23, 2024

SUBJECT:           NCOIL Model EWA Bill

Testimony:

Vice President Hunter, Chairwoman Felzkowski, and Members of the Committee, my name is Hayden Cole, and I am the Director of Federal Government Affairs for the American Fintech Council.

AFC’s mission 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 number of EWA providers, who combined are serving millions of employees across the United States.

AFC commends NCOIL for its thoughtful approach in drafting this model EWA bill. AFC strongly supports establishing state licensing mechanisms to create clear standards. Many elements also align with AFC’s standards for EWA providers, such as:

·      Codifying consumer protections, like at least one no-cost option, no credit checks or reporting, and limitations on collections except in cases of fraud.

·      Requiring clear and robust disclosures to promote consumer understanding.

These provisions are vital for a regulatory framework that balances consumer protection with innovation. However, two areas warrant further consideration:

1. Annual Percentage Rate (APR) Disclosure

Requiring APR disclosures for EWA products is misleading. As AFC has consistently noted, EWA is not a loan and should not be regulated as such. APR, while intended to help consumers understand the cost of the financial product, will actually result in more confusion due to the distinct qualities of EWA products and the fact that they are not loans. Instead, we advocate for simple fee disclosures where workers receive notice of the actual dollars and cents associated with their transaction, not a calculation that artificially obscures costs by annualizing a fee as a percentage of the total amount of the requested transaction. This keeps workers protected and well-informed throughout their engagement with EWA products.

2. Addressing Fraud Risks

We respectfully request strengthening the draft model bill to ensure providers can pursue lawful remedies in cases of fraud or illegal activity. This safeguards the integrity of EWA services and prevents bad actors from exploiting this consumer-friendly product.

The American Fintech Council respects the tireless efforts that have gone into creating the model legislation and appreciates NCOIL’s leadership. We look forward to collaborating to refine this legislation within state houses across the country in a manner that will ensure the continued development of responsible EWA services to employees and help to realign the disconnect between work and reward that pervades the modern payroll industry.

Thank you for your time and consideration,