On May 21, 2024, South Carolina Governor Henry McMaster signed into law the Earned Wage Access Services Act (the “Act”), which will require earned wage access (“EWA”) providers to register annually with the state’s Department of Consumer Affairs and meet certain requirements. The Act also provides exemptions from state lending and other requirements for providers. South Carolina follows Kansas, Wisconsin, Nevada, and Missouri in establishing a distinct statutory framework for EWAs.

The Act identifies two different EWA structures and defines them separately as “consumer-directed wage access services” and “employer-integrated wage access services.” The two structures are distinguished by the source of the information on which EWA eligibility is based. For consumer-directed wage access services, eligibility is based on the consumer’s representations and the provider’s reasonable determination of the consumer’s earned but unpaid income. For employer-integrated wage access services, eligibility is based on employment, income, and attendance data obtained directly or indirectly from an employer.

Both EWA constructs include “earned but unpaid income” as a key component. “Earned but unpaid income” must be earned or have accrued in exchange for the consumer’s services provided to or on behalf of an “employer.” EWAs provided on the basis of receipt of government benefits or public assistance would likely not be covered by the Act (at least under a plain-language reading) and would, thus, appear to not qualify for the exemptions from state laws discussed in more detail below. Given the lack of clarity on whether EWAs are credit under federal law, there could be federal fair lending considerations that arise if providers do not consider public assistance income to fit within the apparent requirements of the SC Act.

In order to offer either of these EWAs in South Carolina, in-state and out-of-state providers must register under the Act unless they are doing business under the authority of and as permitted by any South Carolina or federal law relating to banks, credit unions, savings and loan associations, savings banks, or trust companies. As part of the registration process, providers must submit a schedule of fees. Providers must offer at least one option for a user to obtain an EWA product at no cost to the user.

Under the Act, providers must also:

1. Develop and implement policies and procedures to respond to consumer complaints in an expedient manner;
2. Provide written or electronic disclosures using language intended to be easily understood by a layperson (1) informing the consumer of the terms and conditions of the EWA product; (2) clearly and conspicuously describing how to obtain the no cost product; (3) disclosing a provider phone number or e-mail address for consumer complaints and the website and telephone number for the Department of Consumer Affairs; and (4) disclosing any fees that may be directly imposed by the provider in connection with the EWA;
3. Inform the consumer of any material changes to the terms and conditions;
4. Provide proceeds to a consumer through any means mutually agreed upon;
5. Comply with all local, state, and federal privacy and information security laws;
6. Clearly and conspicuously disclose that any tips are voluntary and make no representations that tips will benefit any specific individuals;
7. Comply with the Electronic Fund Transfer Act and Regulation E and reimburse for any overdraft or non-sufficient funds fees if seeking repayment from a consumer’s deposit account;
8. Obtain the consumer’s consent to repayment from payroll when applicable; and
9. Allow consumers to discontinue receiving services at any time without financial penalty.

In addition to these requirements, providers are prohibited from doing any of the following:

10. Sharing with an employer any fees or tips;
11. Charging a late fee, interest, or any other penalty or charge for failure to repay EWA proceeds;
12. Accepting payment from a consumer through a credit card or charge card;
13. Charging a deferral fee or other similar charge;
14. Soliciting a consumer to delay repayment of outstanding proceeds for the purpose of increasing the total nonmandatory payments (such as a subscription or membership fee or tips) that the provider may collect;
15. Reporting payments or failed repayments to a consumer credit reporting agency or debt collector;
16. Requiring a credit score to determine eligibility;
17. Making false, misleading, or deceptive statements in advertising;
18. Compelling repayment by suing the consumer; using a third-party debt collector, or selling debt to a debt collector or debt buyer; or
19. Providing proceeds in an amount that exceeds the consumer’s earned but unpaid income (for consumer-directed wage access services, this is determined by the consumer’s representations and the provider’s “reasonable determination”).

Providers who comply with the Act’s provisions are not considered lenders under the Consumer Protection Code, deferred presentment providers, or to be engaging in the business of money transmission. EWAs are not considered loans or wage assignments under the Consumer Protection Code, and neither fees nor tips are considered loan finance charges. The Act also contains annual reporting requirements and empowers the Department of Consumer Affairs to issue cease-and-desist orders, assess administrative penalties, require consumer refunds, and deny, revoke, or suspend a provider’s registration.

The Act will go into effect on November 21, 2024.

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