On January 28, 2021, the California Department of Financial Protection & Innovation (DFPI) announced that it entered into five Memorandums of Understanding (MOUs) with five different earned wage access companies. Earned wage access companies provide consumers with advances or “on-demand pay” before their pay day for wages that they have earned but not yet received. According to the DFPI, the MOUs will allow the EWAs to continue operating in California in advance of their registration under the California Consumer Financial Protection Law that took effect earlier this year.
Under California’s new Consumer Financial Protection Law, earned wage access companies are now considered covered financial services that may soon be required to register with the DFPI. These MOUs are the first of their kind, and are designed allow the DFPI to evaluate the costs and benefits of the services that earned wage access companies provide. Under the MOUs, the companies will have to be regularly examined by the DFPI, to adhere to certain “best practices,” such as limiting annual percentage rates on advanced funds to 36%, and to report quarterly on wage advance volumes, repayment rates, fees, and other parts of their business.
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