Governor Laura Kelly's recent signing of Kansas House Bill 2560 into law shows increasing bipartisan support for licensing the earned wage access (EWA) industry and safeguarding workers’ access to the service. The new law appropriately regulates EWA as a unique financial product. It creates a regulatory framework that gives EWA providers certainty in operating in the state and clarity for business owners who offer EWA products. It ensures workers can continue accessing their already-earned wages to manage expenses between cycles and have an alternative to traditional, high-cost products.

Kansas is now the fourth state to regulate EWA after Wisconsin Governor Tony Evers signed EWA legislation into law earlier this year. This is a testament to the growing bipartisan support for codifying industry best practices. The bipartisan nature of this support, with both Democrat and Republican governors signing EWA legislation into law, is a positive sign for the EWA industry. It also ensures that consumers have alternatives to existing and harmful lending products that can negatively impact their financial lives.

The new Kansas law explicitly requires all EWA providers to register annually with the Kansas State Bank Commissioner. Registered providers then need to adhere to specific state requirements, including:

• Provide all proceeds on a non-recourse basis
• Clearly disclose to each consumer all associated fees
• Offer a no-cost option
• Allow the consumer to cancel the service at any time without incurring a cancellation fee

In addition, EWA providers would be prohibited from doing the following:

• Using any debt-collecting methods to seek repayment, including phone calls, sales to third-party debt collectors, penalties, or interest/finance charges
• Accepting credit as a form of payment for transfer fees
• Reporting a consumer's failed repayment to a credit reporting agency
• Requiring a credit score to determine a consumer's eligibility

EWA is a powerful financial wellness tool, as evidenced by the fact that employers across the country already offer it to their employees as a financial wellness resource. This tool gives employees the financial freedom to access liquidity when unexpected expenses arise. It allows them to access the money they have earned and meet financial challenges and needs, thereby avoiding late fees, bank overdraft fees, and high-cost credit products like payday loans or high-APR credit cards. A study by the Financial Health Network in December 2023 found that workers used EWA to pay bills ahead of their regularly scheduled payday or cover some other financial shortfall. Notably, nearly all participants in the study did not view EWA as a loan. Instead, they saw it as a means to access wages they had already earned, fundamentally different from borrowing against future earnings.

The participants also preferred EWA to alternatives and other short-term liquidity options, with one user adding that EWA allowed them “to access the liquidity they needed while preserving their dignity.”

Kansas Governor Laura Kelly’s signature on the most recent EWA law is a sign of what is to come and a clear recognition of the increasing widespread adoption of EWA products nationwide and the many benefits these products offer consumers.