A2064

An Act concerning earned income access services, amending P.L.2005, c.199, and supplementing Title 17 of the Revised Statutes.

Be It Enacted by the Senate and General Assembly of the State of New Jersey:

1. (New section) As used in P.L. , c. (C. ) (pending before the Legislature as this bill):

“Consumer” means a natural person working in the State of New Jersey.

“Department” means the Department of Banking and Insurance.

“Earned but unpaid income” means earned income that has not yet been paid to the consumer by an earned income obligor.

“Earned income” means fundsthat a consumer or obligor has represented, and the earned income access service provider has reasonably determined based on that representation, have accrued to the benefit of that consumer for services rendered to an earned income obligor.

“Earned income access service provider” or “provider” means any person that is engaged in the business of delivering earned but unpaid income to a consumer in New Jersey through an integration with an employer. “Earned income access service provider” shall not include a wage advance provider that does not operate through an integration with an employer.

“Earned income access services” means the delivery of funds to a consumer that represent earned but unpaid income and which shall not be considered a loan.

"Fees" means a cost to the consumer for earned income access services required by the provider.

“Nationwide Multistate Licensing System” means the licensing system owned and operated by the State Regulatory Registry LLC, a wholly-owned subsidiary of the Conference of State Bank Supervisors, which functions as a system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and the United States Territories of Puerto Rico, the US Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew, and surrender license authorities.

“Obligor” means an employer or another person who is contractually obligated to pay the consumer any sum of money on an hourly, project-based, piecework, or other basis for labor or services provided by the consumer. “Obligor” shall not include a customer of an obligor or other third party whose obligation to make any payment

to a consumer is based solely on the consumer’s agency relationship with the obligor.

“Proceeds” mean the amount of earned but unpaid income that has been remitted to the consumer by a provider.

"Voluntary payments" means a remittance amount of the consumer’s choosing, paid by the consumer to the provider, that may or may not be considered revenue by the provider, and which shall not be subject to any annual percentage rate calculation.

2. (New section) a. An earned income access service provider shall offer earned income access services through a contractual arrangement with an obligor or a service provider to an obligor, in which the provider:

(1) reasonably verifies a consumer’s earned income; and

(2) delivers earned but unpaid income to the consumer prior to the date on which the obligor is scheduled to pay the consumer and the amount of the earned but unpaidincome delivered by the provider to the consumer is reduced or withheld from the consumer’s next payment.

b. An obligor shall not share information with an earned income access service provider pertaining to the obligor’s accrued and expected obligations to the consumer unless:

(1) the obligor or service provider to the obligor has entered into a contractual arrangement for earned income access services with the earned income access service provider; or

(2) the consumer consents to sharing that information.

c. The imposition of a fee on a consumer who opts to use the services of an earned income access service provider, and the reduction or withholding from a consumer’s payment as set forth in subsection a. of this section, shall not violate section 4 of P.L.1965, c.173 (C.34:11-4.4) or section 13 of P.L.1999, c.90 (C.34:11-4.14) , or subsection a. of section 41 of P.L.1996, c.157 (C.17:11C-41), provided that the consumer is informed in writing of the right to receive the full amount of the consumer’s wages, without discount or expense, if the consumer waits until the regular payment due date.

d. If a provider charges interest or finances charges, or their equivalent, to a consumer who opts to use the services of an earned income access service provider, determined by the application of a stated rate over a defined period of time, then the provisions of the civil usury law, R.S.31:1-1, and the criminal usury law, N.J.S. 2C:21-19, shall apply.This provision shall not apply to fees and voluntary payments as defined pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill).

3. (New section) a. Any earned income access services that fail to comply with the provisions of section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be subject to:

(1) the provisions of the civil usury law, R.S.31:1-1, and the criminal usury law, N.J.S. 2C:21-19;

(2) any provisions of Titles 17 or 56 of the Revised Statutes that would otherwise apply to a loan or credit transaction; and

(3) the federal "Truth in Lending Act," 15 U.S.C. s.1601 et seq. and the regulations implementing that act, 12 C.F.R. s.226 et seq., to provide any disclosures required for closed-end loans.

b. Earned income access services that do not comply with section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be considered a loan, even if those services are provided without recourse, and any required fees, other required contributions, or voluntary payments for those services shall be considered as interest when determining the rate of interest for purposes of compliance with a law with which an earned income access service provider is required to comply pursuant to the provisions of this section.

c. (1) (a) Beginning the effective date of P.L. , c. (pending before the Legislature as this bill), a person shall not offer earned income access services in this State without first obtaining a license from the Department of Banking and Insurance in accordance with this paragraph and paying the licensing or renewal fee, as applicable, set by the department. The department may issue a license to an applicant pursuant to this paragraph only if the department is satisfied that the applicant possesses the necessary organization, expertise, and financial integrity to supply the services sought to be offered. A license issued pursuant to this paragraph shall be valid for a period of one year.

(b) A license issued pursuant to this paragraph shall not be transferable.

(c) The department may suspend, revoke or place on probation a licensee with reasonable notice under any of the following circumstances:

(i) The licensee has engaged in fraudulent activity that constitutes a violation of State or federal law;

(ii) The department has received consumer complaints that justify an action under this subparagraph to protect the safety and interests of consumers; or

(iii) The licensee fails to comply with any requirement set forth in P.L. , c. (C. ) (pending before the Legislature as this bill).

(d) The department is authorized to establish relationships or contracts with the Nationwide Multistate Licensing System and Registry, or other entities designated by the Nationwide Multistate Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to this division. The department may use the Nationwide Multistate Licensing System and Registry as a channeling agent for requesting information from, and distributing information to, the Department of Justice or any governmental agency.

(e) The department may at any time investigate the business of all licensees and, for the purpose of effectuating P.L. , c. (C. ) (pending before the Legislature as this bill), the department shall have free access, to the books, papers, and records of the licensee, and shall also have the authority to examine, under oath, any person whose testimony the department may require relative to such business. The cost and charges of any such examination or investigation shall be borne by the licensee. The examination shall be conducted in accordance with generally accepted examination procedures and pursuant to established and objective criteria developed by the department. The department shall issue to the licensee an itemized invoice setting forth the number of hours and the work performed in connection with the examination.

(2)The application for the license pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall be made in the form and medium to be prescribed by the department by regulation, utilizing the Nationwide Multistate Licensing System. Each provider shall include with its renewal a list of the fees charged by the provider.

d. An initial application for a license pursuant to P.L. , c. (C. ) (pending before the Legislature as this bill) shall include:

(1) the legal name of the applicant, each current or proposed business address of the applicant, and any fictitious or trade name the applicant uses or plans to use in conducting its earned income access services with a consumer or obligor;

(2) the legal name, any former or fictitious name, and the residential and business address of each executive officer and responsible individual of the applicant, and each controlling person of the applicant;

(3) a concise description of the current and former business of the applicant for the five years before the application is submitted or if the business has operated for less than five years, for the time the business has operated, including its products and services;

(4) the name, address, and telephone number of a person who manages each server the applicant expects to use in conducting its earned income access services activity with a consumer or obligor;

(5) a list of all other states in which the applicant is licensed or registered to engage in the earned income access services and any license revocation, license suspension, or other disciplinary action taken against the provider in another state and any license applications rejected by another state;

(6) a list of any criminal conviction, deferred prosecution agreement, and pending criminal proceeding in any jurisdiction against the applicant, any executive officer, responsible individual, and controlling person of the applicant, and each person over which the applicant has control;

(7) a list of any litigation, arbitration, or administrative proceeding in any jurisdiction in which the applicant, or an executive officer, responsible individual, or controlling person of the applicant has been a party to for the five years before the application is submitted, determined to be material in accordance with generally accepted accounting principles and, to the extent the applicant would be required to disclose the litigation, arbitration, or administrative proceeding in the applicant’s audited financial statements, reports to equity owners, and similar statements or reports;

(8) a list of any bankruptcy or receivership proceeding in any jurisdiction for the 10 years prior to the application’s submission in which the applicant, any executive officer, responsible individual, or controlling person of the applicant, or person over which the applicant has control, was a debtor;

(9) the United States Postal Service address and electronic mail address to which communications from the department may be sent; the name, United States Postal Service address, and electronic mail address of the registered agent of the applicant in this State, if applicable;

(10) a copy of any certificate of coverage for each liability, casualty, business-interruption, or cyber-security insurance policy maintained by the applicant for itself or the applicant’s users;

(11) a description of the structure or organization of the applicant, including any parent or subsidiary of the applicant, and whether any parent or subsidiary is publicly traded;

(12) if applicable, the date on which and the state in which the applicant is formed, and a copy of a current certificate of good standing issued by that state;

(13) a copy of the applicant’s audited financial statements for the most recent fiscal year and, if available, for the two-year period next preceding the submission of the application;

(14) a copy of the applicant’s unconsolidated financial statements for the current fiscal year, whether audited or not, and if available, for the two-year period next preceding the submission of the application;

(15) if a corporation has control of the applicant and the corporation’s equity interests are publicly traded in the United States, a copy of the audited financial statement of the corporation for the most recent fiscal year or most recent report of the corporation filed under section 13 of the “Securities Exchange Act of 1934,” 15 U.S.C. s.78m;

(16) if a corporation has control of the applicant and the corporation’s equity interests are publicly traded outside the United States, a copy of the audited financial statement of the corporation for the most recent documentation similar to that required in paragraph (15) of this subsection, filed with the foreign regulator in the domicile of the corporation;

(17) if available, for each executive officer, responsible individual, or controlling person of the applicant, for the three years before the application is submitted, the employment history, and the history of any enforcement action against those persons or legal proceeding to which those persons were a party.

e. The department may conduct a criminal history records check of the applicant, any controlling persons, executive officers, and responsible individuals of the applicant and require the applicant to submit the fingerprints of those persons as part of the application. The department is authorized to exchange fingerprint data with and receive criminal history record information from the State Bureau of Identification in the Division of State Police and the Federal Bureau of Investigation consistent with applicable State and federal laws, rules and regulations, for the purposes of facilitating determinations concerning licensure eligibility for the applicant, any controlling persons, executive officers, and responsible individuals of the applicant. The applicant shall bear the cost for the criminal history record background check, including all costs of administering and processing the check. The Division of State Police shall promptly notify the department in the event any person who was the subject of a criminal history record background check pursuant to this section, is arrested for a crime or offense in this State after the date the background check was performed, whether the person is a prospective new licensee, or subsequently, a current license holder.

f. No license shall be issued by the department to an individual who has, within the five years preceding the submission of an application for a license, been convicted of embezzlement, forgery, fraud, or theft.

4. (New section) A provider shall comply with all of the following requirements:

a. A provider shall permit a consumer to cancel participation in an earned income access program at any time without incurring a charge for doing so.

b. Before entering a contract to provide a consumer with earned income access services, the provider shall provide the consumer with a written paper or electronic document. That document shall meet all of the following requirements:

(1) inform the consumer of the consumer’s rights under the earned income access program

(2) include a statement at the top of the document, which identifies the department as the regulatory agency overseeing the services performed and provides contact information for the department through which consumers can submit complaints;

(3) be written clearly and conspicuously in a minimum 12-point type, or, if provided electronically, be easily legible; and

(4) be written in language intended to be understood by a layperson.

c. A provider shall deliver funds to the consumer via any means mutually agreeable to the consumer and the provider.

d. A provider shall not require a consumer to open an account at a particular depository institution as a condition of providing earned income access services.

e. A provider shall not receive an additional payment to defer collection of the amount advanced or defer an additional required payment beyond the worker’s payday or beyond the date that the consumer is contractually obligated to repay the consumer’s income-based advance.

f. A provider shall not solicit a consumer to delay the delivery of an advance for the purpose of increasing the total charge the provider may collect.

g. (1) The provider shall not rely on a credit report or score in order to determine the consumer's eligibility for proceeds.

(2) A provider shall not report a consumer’s repayment or failed repayment of an earned income advance to any person other than the consumer or obligor.

h. If an obligor fails to meet its payroll obligation or contractual obligation to a consumer or fails to meet its contractual obligation to a provider, the consumer shall not be held liable for any resulting failed repayment of an earned income advance. However, nothing in this subsection shall limit the remedies available against the obligor.

i. (1) Fees and voluntary payments for earned income access services cannot exceed an average cap established by the department following receipt of the reports established pursuant to section 5 of P.L. , c. (pending before the Legislature as this bill) and a stakeholder comment period.

(2) If necessary, the provider shall conduct a reconciliation on an average basis across all earned income access service consumers annually and refund any excess fees or voluntary payments in excess of the cap determined by the department pursuant to paragraph (1) of this subsection within 30 days of the end of the annual period. A provider is not prohibited from conducting reconciliations and issuing refunds more frequently provided those processes result in full compliance.

j. Providers shall comply with National Automated Clearing House Association rules. When a debit is initiated to a consumer's account for a payment, and the debit is returned for insufficient or uncollected funds, the debit can be reinitiated up to two times within one hundred eighty days after the original entry.

k. The provider shall not provide to any third-party, including obligors, any non-public personal information without a consumer’s consent except in compliance with applicable federal and state law, including but not limited to the sharing of information agreed to under section 2 of P.L. , c. (C. ) (pending before the Legislature as this bill).

l. The provider shall not sell, share, or otherwise disclose personal information that is solicited or collected from a consumer other than to provide the services.

5. (New section) A provider shall file an annual report with the commissioner that includes:

a. Gross revenue from fees and voluntary payments received by the provider for the earned income access service. The provider shall distinguish between revenue received from consumers and revenue received from third parties providing services to consumers;

b. The total number of earned income access transactions provided to consumers;

c. The total dollar amount of proceeds the provider remitted to consumers;

d. The total dollar amount of fees and voluntary payments the provider received from consumers for earned income access services;

e. The total number of earned income access transactions for which the provider has not received any repayment;

f. The total dollar amount of proceeds for which the provider has not received any repayment; and

g. The total number of earned income access transactions wholly uncollected from consumers, and total dollar amount of those proceeds.

6. (New section) a. The department shall grant or deny any earned income access service provider license application within 120 days of a completed application.

b. The department may refuse an application for an earned income access services license or license reciprocity application if:

(1) the application is incomplete in a material respect;

(2) the application includes false, misleading, or inaccurate

information;

(3) any applicant, controlling person, key individual, or responsible individual of an applicant has engaged in dishonest or unethical practices in a financial service or in the securities, commodities, banking, insurance, or investment advisory business; or

(4) Any material aspect of the license application as represented

by the application requirements contained in section 3 of P.L. , c. (C. ) (pending before the Legislature as this bill).

c. Any person who violates any provision of P.L. , c. (C. ) (pending before the Legislature as this bill) shall be liable for a penalty, in addition to any other penalty imposed by law, of not more than $5,000 for the first violation and not more than $15,000 for subsequent violations. The penalty shall be paid to the department to be used in accordance with P.L. , c. (C. ) (pending before the Legislature as this bill) and shall be collected pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.). The court shall also award court costs and reasonable attorneys' fees to the department.

7. (New section) a. An earned income access service provider shall comply with all applicable federal laws.

b. In addition to any other remedies provided by law, a violation of any federal law or regulation shall be deemed a violation of this section and a basis upon which the commissioner may take enforcement action pursuant to section 4 of this act.

8. (New section) Notwithstanding the provisions of the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.), to the contrary, the Commissioner of Banking and Insurance may adopt, immediately upon filing with the Office of Administrative Law, rules and regulations that the commissioner deems necessary provide for the licensing of providers under this act, including the establishment of investigation and licensing fees, and such other rules and regulations as are necessary or proper to carry out the provisions of this act, which rules and regulations shall be effective for a period not to exceed 360 days from the date of the filing. The commissioner shall thereafter amend, adopt, or readopt the rules and regulations in accordance with the requirements of P.L.1968, c.410 (C.52:14B-1 et seq.).

9. Section 2 of P.L.2005, c.199 (C.17:1C-34) is amended to read as follows:

2. For the purposes of this act:

"Assessment" means the assessment imposed pursuant to section 3 of this act for the special functions of the division as provided in that section.

"Commissioner" means the Commissioner of Banking and Insurance.

"Department" means the Department of Banking and Insurance.

"Depository institution" means any entity holding a state charter for a bank, savings bank, savings and loan association or credit union, irrespective of whether the entity accepts deposits.

"Division" means the Division of Banking in the Department of Banking and Insurance.

["Nationwide Mortgage Licensing System and Registry" means the mortgage licensing system developed and maintained by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators, or their successors, and utilized in this State pursuant to the provisions of the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.).]

"Nationwide Multistate Licensing System” means the licensing system owned and operated by the State Regulatory Registry, LLC, a wholly-owned subsidiary of the Conference of State Bank Supervisors, which functions as a system of record for non-depository, financial services licensing or registration in participating state agencies, including the District of Columbia and the United States Territories of Puerto Rico, the US Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew, and surrender license authorities.

"Other financial entity" means a person who is licensed or registered pursuant to: the "New Jersey Consumer Finance Licensing Act," sections 1 through 49 of P.L.1996, c.157 (C.17:11C-1 et seq.); the "New Jersey Residential Mortgage Lending Act," sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.), other than a financial entity with respect to the payment of required fees to the Nationwide [Mortgage] Multistate Licensing System [and Registry] as set forth by that nationwide system and registry; "The Check Cashers Regulatory Act of 1993," P.L.1993, c.383 (C.17:15A-30 et seq.); the "New Jersey Money Transmitters Act," P.L.1998, c.14 (C.17:15C-1 et seq.); the "Insurance Premium Finance Company Act," P.L.1968, c.221 (C.17:16D-1 et seq.); the "Retail Installment Sales Act of 1960," P.L.1960, c.40 (C.17:16C-1 et seq.); the "Door-to-Door Retail Installment Sales Act of 1968," P.L.1968, c.223 (C.17:16C-61.1 et seq.); the "Home Repair Financing Act," P.L.1960, c.41 (C.17:16C-62 et seq.); the "Door-to-Door Home Repair Sales Act of 1968," P.L.1968, c.224 (C.17:16C-95 et seq.); P.L.1979, c.16 (C.17:16G-1 et seq.); the "Foreclosure Rescue Fraud Prevention Act," P.L.2011, c.146 (C.46:10B-53 et al.); the “Mortgage Servicers Licensing Act,” P.L.2019, c.65 (C.17:16F-27 et al.); the provisions of P.L.2019, c.200 (C.17:16ZZ-1 et al.); [or] the "pawnbroking law," R.S.45:22-1 et seq; or P.L. , c. (C. ) (pending before the Legislature as this bill).

"Regulated entity" means a depository institution, other financial entity or person chartered, licensed or registered by the Division of Banking or who should be chartered, licensed or registered.

(cf: P.L.2019, c.200, s.17)

10. This act shall take effect immediately but shall remain inoperative until the 120th day next following enactment, except the Commissioner of Banking and Insurance may take any anticipatory administrative action in advance as shall be necessary for the implementation of this act.

STATEMENT

This bill creates certain requirements for earned income access service providers.

Under the bill, “earned income access services” means the delivery of funds to a consumer that represent earned but unpaid income and which should not be considered a loan. “Obligor” means an employer or another person who is contractually obligated to pay the consumer any sum of money on an hourly, project-based, piecework, or other basis for labor or services provided by the consumer. The bill defines “consumer” to mean a natural person working in the state of New Jersey.

The bill requires an earned income access service provider to offer earned income access services through a contractual arrangement with an obligor or a service provider to an obligor, in which the provider:

(1) reasonably verifies a consumer’s earned income; and

(2) delivers earned but unpaid income to the consumer prior to the date on which the obligor is scheduled to pay the consumer and the amount of the earned but unpaid income delivered by the provider to the consumer is reduced or withheld from the consumer’s next payment.

The bill prohibits an obligor from sharing information with an earned income access service provider pertaining to the obligor’s accrued and expected obligations to the consumer unless:

(1) the obligor or service provider to the obligor has entered into a contractual arrangement for earned income access services with the earned income access service provider; or

(2) the consumer consents to sharing that information.

Under the bill, if a provider charges interest or finances charges, or their equivalent, to a consumer who opts to use the services of an earned income access service provider, determined by the application of a stated rate over a defined period of time, then the provisions of the civil usury law and the criminal usury law are to apply, except that this provision is not to apply to fees and voluntary payments as defined pursuant to the bill.

The bill provides that any earned income access services that fail to comply with the provisions of the bill are subject to:

(1) the provisions of the civil usury law and the criminal usury law;

(2) any provisions of Titles 17 or 56 of the Revised Statutes that would otherwise apply to a loan or credit transaction; and

(3) the federal "Truth in Lending Act," 15 U.S.C. s.1601 et seq. and the regulations implementing that act to provide any disclosures required for closed-end loans.

Earned income access services that do not comply with section 2 of the bill are to be considered a loan, even if those services are provided without recourse, and any required fees, other required contributions, or voluntary payments for those services are to be considered as interest when determining the rate of interest for purposes of compliance with a law with which an earned income access service provider is required to comply pursuant to the provisions of the bill.

The bill provides that a person is not to offer earned income access services in this State without first obtaining a license from the Department of Banking and Insurance in accordance with the bill and paying the licensing or renewal fee, as applicable, set by the department. The department may issue a license to an applicant only if the department is satisfied that the applicant possesses the necessary organization, expertise, and financial integrity to supply the services sought to be offered. A license is to be valid for a period of one year, is not to be transferable, and the application for a license is to be granted or denied within 120 days of completed application. The department may suspend, revoke or place on probation a licensee with reasonable notice under any of the following circumstances:

(1) The licensee has engaged in fraudulent activity that constitutes a violation of State or federal law;

(2) The department has received consumer complaints that justify an action to protect the safety and interests of consumers; or

(3) The licensee fails to comply with any requirement set forth in the bill.

Under the bill, the department is authorized to establish relationships or contracts with the Nationwide Multistate Licensing System and Registry, or other entities designated by the Nationwide Multistate Licensing System and Registry to collect and maintain records and process transaction fees or other fees related to licensees or other persons subject to the bill. The department may use the Nationwide Multistate Licensing System and Registry as a channeling agent for requesting information from, and distributing information to, the Department of Justice or any governmental agency.

The bill authorizes the department investigate the business of all licensees, have free access, to the books, papers, and records of any licensee, and examine, under oath, any person whose testimony the department may require. The cost and charges of any such examination or investigation are to be borne by the licensee.

The bill provides that no license is to be issued by the department to an individual who has, within the five years preceding the submission of an application for a license, been convicted of embezzlement, forgery, fraud, or theft.