Lawmakers Ponder Benefits and Risks of Financial Tool for Cash-Strapped Workers

There’s plenty of evidence that many Oregonians live paycheck to paycheck—45% of households do, according to a 2024 survey.

And more than 145,000 Oregon workers, according to industry sources, have taken advantage of a relatively new—and currently, in Oregon, unregulated—tool called “earned wage access,” or in the parlance of the financial technology companies that offer them, EWA.

Here’s how EWA products function: Workers either sign up with a provider who partners with their employer, or access third-party apps that allow them to take an advance against wages they have earned but not yet been paid.

The EWA provider—there are many—then charges a fee for that service (and in some cases, asks the worker for tips as an additional form of compensation).

At issue in Salem (and in other states) is how the fast-growing industry should be regulated.

Providers have proposed legislation that would require them to be licensed by the Oregon Department of Consumer and Business Services and limit fees to no more than $7 per transaction.

In testimony on Senate Bill 481, EWA providers emphasized the need for their product and said that state licensure would weed out bad actors, while providing a better alternative to other sources of short-term cash, such as payday loans, credit card advances or bank overdrafts. They argue that advances are not loans; that providers don’t send late payers to collections agencies; and they do not charge interest (instead, they charge a flat fee).

“The access fee for EWA services is comparable to the average ATM fee, and is functionally the same service,” Garth McAdam, the general counsel of ZayZoon, an Arizona EWA provider, told lawmakers this week. A 2023 Harvard Kennedy School study found workers really like the product.

But consumer advocates pushed back hard against the industry, telling lawmakers in a Feb. 4 public hearing that EWA is just another form of high-interest lending, a newer version of the predatory payday loans that Oregon has previously cracked down on.

“This bill is an industry initiative designed to exempt earned wage/income access (EWA) products from state lending laws while failing to provide meaningful consumer protections,” Chris Coughlin of the Oregon Consumer Justice testified. “Don’t open the door to the next generation of payday loans.”

Other groups, including AARP Oregon, Service Employees International Union, the Oregon Law Center, and the National Consumer Law Center signed on to Coughlin’s testimony.

EWAs are regulated differently across the country. Consumer advocates pointed to Connecticut and Maryland as two states that are doing a good job of looking out for the workers who use the products.

Federally, the nonpartisan Congressional Research Service took a look at EWAs in 2024. In a report, the agency noted that EWA use is widespread and growing rapidly—in 2022, 10 million Americans used them to access $32 billion in cash advances.

The federal Consumer Financial Protection Bureau moved away from an initial 2020 opinion that EWA should not be regulated as credit instruments, i.e., loans. The watchdog agency moved last year toward a position that EWA should in fact be regulated like loans.

Part of the reason: In a study, the feds found “the average effective annual percentage rate (APR) of employer-partnered EWA was 109%.”

Consumer advocates point to that kind of rate and the fact that EWA customers tend to use the products over and over as evidence Oregon should regulate EWA strictly. EWA providers say the high interest rate is misleading because workers only use the advances for a short period of time before getting their paychecks.

There will be plenty of further debate on the matter. SB 481 got a public hearing that stretched over two sessions of the Senate Business and Labor Committee last week, and committee chair Sen. Kathleen Taylor (D-Portland) said she’ll bring the bill back for further consideration.

This story was produced by the Oregon Journalism Project, a nonprofit newsroom covering rural Oregon. OJP seeks to inform, engage, and empower readers with investigative and watchdog reporting that makes an impact. Our stories appear in partner newspapers across the state. Learn more at oregonjournalismproject.org.