S3110

An Act concerning earned wage access services and supplementing Title 17 of the Revised Statutes.

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

1. This act shall be known and may be cited as the “New Jersey Earned Wage Access Services Act.”

2. As used in this act:

“Applicant” means a person who applied for a license pursuant to this act.

“Commissioner” means the Commissioner of Banking and Insurance.

“Consumer” means a natural person who resides in this State.

“Consumer-directed earned wage access services” means delivering to a consumer access to earned but unpaid income that is based on the consumer’s representations and the provider’s reasonable determination of the consumer’s earned but unpaid income.

“Controlling interest” means ownership, control, or interest of 25 percent or more of a person.

“Department” means the Department of Banking and Insurance.

“Earned but unpaid income” means salary, wages, compensation, or other income that a consumer or an employer has represented, and that a provider has reasonably determined, has been earned or accrued to the benefit of the consumer in exchange for the consumer’s provision of services to the employer or on behalf of the employer, including on an hourly, project-based, piecework, or other basis and including circumstances in which the consumer is acting as an independent contractor of the employer, but has not, at the time of the payment of proceeds, been paid to the consumer by the employer.

“Earned wage access services” means providing consumer-directed wage access services or employer-integrated wage access services, or both.

“Employer” means:

(1) a person who employs a consumer; or

(2) any other person who is contractually obligated to pay a consumer earned but unpaid income in exchange for the consumer’s provision of services to the employer or on behalf of the employer including on an hourly, project-based, piecework, or other basis and including circumstances in which the consumer is acting as an independent contractor with respect to the employer.

“Employer” shall not include:

(1) a customer of an employer; or

(2) any other person whose obligation to make a payment of salary, wages, compensation, or other income to a consumer is not based on the provision of services by that consumer for or on behalf of the person.

“Employer-integrated wage access service” means delivering to a consumer access to an advance of earned but unpaid income that is based on employment, income, and attendance data obtained directly or indirectly from an employer or an employer’s payroll service provider.

“Fee” means:

(1) a fee imposed by a provider for delivery or expedited delivery of proceeds to a consumer; or

(2) a subscription or membership fee imposed by a provider for a bona fide group of services that include earned wage access services.

“Fee” shall not include a voluntary tip, gratuity, or other donation.

“Individual” means a natural person.

“Licensee” means a provider who is licensed under this act.

“Nationwide Multistate Licensing System and Registry” or “NMLS” 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 United States Virgin Islands, and Guam, where it is the official system for companies and individuals seeking to apply for, amend, renew, and surrender licenses to appropriate authorities.

“Outstanding proceeds” means proceeds remitted to a consumer by a provider that have not yet been repaid to the provider.

“Person” means an individual, association, joint venture, partnership, limited partnership association, limited liability company, corporation, trust, or any other business entity organized under the laws of this State.

“Proceeds” means a payment to a consumer by a provider that is based on earned but unpaid income.

“Provider” means a person that is in the business of providing earned wage access services to consumers.

“Provider” shall not include:

(1) a service provider, such as a payroll service provider, whose role may include verifying the available earnings but is not contractually obligated to fund any proceeds delivered as part of an earned wage access service; or

(2) an employer that offers a portion of salary, wages, or compensation directly to its employees or independent contractors before the normally scheduled pay date.

3. No person shall engage in business as a provider without first obtaining a license under this act.

4. A depository institution or trust company shall not be subject to the provisions of this act.

5. a. The commissioner shall issue a license to a provider pursuant to this act if the following conditions are met:

(1) the applicant submits an application for a new license or for a renewal of a license to the commissioner in the form and manner, and accompanied by evidence in support of the application, as required by this act and as may be prescribed by the commissioner, accompanied by the fees required pursuant to section 6 of this act;

(2) the commissioner finds that the financial responsibility, experience, character, and general fitness of the applicant for a new license or for a renewal of a license demonstrate that the business will be operated honestly, fairly, and efficiently within the purposes of this act, and all other licensing requirements of this act and regulations promulgated by the commissioner are met; and

(3) the applicant submits to the commissioner the name, address, fingerprints, and written consent for a criminal history record background check to be performed on any officer, director, partner, or owner of a controlling interest of the applicant. The commissioner 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, based upon any findings related to an officer, director, partner, or owner. The applicant shall bear the cost for the criminal history record background check. The Division of State Police shall promptly notify the commissioner in the event an officer, director, partner, or owner of the applicant, who was the subject of a criminal history record background check pursuant to this paragraph, is arrested for a crime or offense in this State after the date the background check was performed, whether the applicant is a prospective new licensee, or subsequently, a current license holder.

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

6. a. An applicant for a new license or for a renewal of a license shall pay to the commissioner at the time of the application a nonrefundable application fee not to exceed $700.

b. Other fee amounts shall be prescribed by the commissioner.

7. a. A license shall state the name of the licensee and the licensee's principal place of business within or outside of the State, and shall contain any other information as the commissioner may require. No licensee shall transact business regulated under this act under any name other than the name on the license. No licensee shall change the name or address of the licensee's principal place of business without notice in a form and manner as prescribed by the commissioner.

b. A license issued pursuant to this act shall not be transferable or assignable, other than as provided for in section 9 of this act.

c. Nothing in this act shall be construed to require a licensee to maintain an office in this State so long as the licensee is licensed to do business in the State and has a registered agent for service of process.

d. If a licensee changes the address of its principal place of business, the licensee shall file, as part of the notice of address change required pursuant to subsection a. of this section, any documents required by regulation.

8. a. A license issued pursuant to this act shall expire at the end of a license period of not less than two years as prescribed by the commissioner by regulation.

b. A licensee may surrender any license by delivering to the commissioner the license and written notice that the license is surrendered and complying with any regulation set forth by the commissioner concerning the license surrender, but the surrender shall not affect the licensee's civil or criminal liability for an act committed prior to the surrender.

9. Any sale or transfer of a controlling interest in a licensee's or applicant's business shall be approved by the commissioner prior to the transfer or sale, after the licensee or applicant has provided an application which contains a written notice of the proposed sale or transfer to the commissioner. The application shall list each officer, director, partner, or owner to receive a controlling interest as a result of the transfer or sale, and each shall be subject to a criminal history record background check as set forth in paragraph (3) of subsection a. of section 5 of this act as a condition for the commissioner's approval of the transfer or sale. The commissioner shall approve the transfer or sale unless the commissioner determines, following notice and an opportunity for a hearing, that sufficient grounds exist to deny, revoke, or suspend the license. The sale or transfer shall be deemed approved if the commissioner does not deny a completed application within 90 days after its receipt.

10. a. An applicant for a license shall prove in a form satisfactory to the commissioner, that the applicant has a net worth of at least $100,000, and has liquid assets of at least $100,000 available for the purpose of making earned wage access transactions.

b. A licensee shall have at all times a net worth of at least $100,000 and shall maintain at all times assets of at least $100,000 in liquid form available for or actually used in the making of earned wage access transactions.

11. The commissioner's authority with respect to issuing licenses under this act, and with respect to oversight of licensees and enforcement of the activities regulated under this act, shall include the following:

a. The commissioner may refuse to issue and may revoke, suspend, or refuse to renew a license, or impose a penalty pursuant to this act, if the commissioner finds, after notice and an opportunity for a hearing in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C.52:14B-1 et seq.) and any rules adopted thereunder, that any person, applicant for, or holder of the license has:

(1) violated any of the provisions of this act or any order, rule, or regulation made or issued pursuant to this act;

(2) failed at any time to meet the requirements for licensure, or withheld information or made a material misstatement in the application for the license;

(3) been convicted of an offense involving breach of trust, moral turpitude, or fraudulent or dishonest dealing, or had a final judgment entered against the person in a civil or administrative action upon grounds of fraud, misrepresentation, or deceit, or failure to maintain books, accounts, records, and other documents as required by section 12 of this act;

(4) become insolvent, or failed to attain or maintain the required net worth required pursuant to section 10 of this act;

(5) demonstrated unworthiness, incompetence, bad faith, or dishonesty in the transaction of business as a licensee; or

(6) engaged in any other conduct deemed by the commissioner to be the cause for denial, revocation, suspension, or refusal of the license or license renewal.

b. A license may be suspended, revoked, or not renewed by the commissioner if any officer, director, partner, or owner of the licensee has committed any act which would be cause for suspending, revoking, or not renewing a license if issued to that person as an individual.

c. If a license is suspended or revoked pursuant to subsection b. of this section, the license shall remain suspended or revoked, unless within a period of time fixed by the commissioner. In the case of:

(1) a partnership, the connection therewith of the offending individual shall be severed and that individual's interest in the partnership and share in its activities brought to an end;

(2) an association, corporation, or other business entity, the offending individual shall be discharged and have no further participation in the entity's activities; or

(3) an offending individual who is an officer or director of the corporation or other business entity, that individual shall be required to fully divest of all stock, bonds or other corporate holdings.

d. The commissioner may access and examine books, accounts, records, and other documents maintained by a licensee pursuant to section 12 of this act.

e. The commissioner may conduct investigations, which may include the subpoena of witnesses and documents, pursuant to section 13 of this act.

f. Whenever it appears to the commissioner that any person has engaged, is engaging, or is about to engage, in any practice or transaction prohibited by this act, the commissioner may, in addition to any other remedy available, bring a summary action in a court of competent jurisdiction against the person, and any other person concerned or in any way participating in or about to participate in a practice or transaction in violation of this act, to enjoin the person from continuing the practice or transaction engaged, or from engaging in the practice or transaction, or doing any act in furtherance of engaging in the practice or transaction.

g. The commissioner may impose a civil penalty not exceeding $25,000 on any person for a violation of this act. Each violation of the act, including any order, rule, or regulation made or issued pursuant to the act, shall constitute a separate offense. Additionally, each violation which constitutes a knowing violation shall be considered a crime of the third degree.

h. The commissioner may order that any person who has been found to have knowingly violated any provision of this act or of the rules and regulations issued pursuant thereto, and has thereby caused financial harm to consumers, be barred for a term not exceeding 10 years from acting as a provider, or a stockholder, or an officer, director, partner, or other owner, or an employee of a licensee, or acting in any other capacity pursuant to this act. Violations of this final order shall be considered a crime of the third degree.

12. a. A licensee shall identify the place of business where books, accounts, records, and other documents of the business conducted under the license, as may be prescribed by the commissioner, are maintained, to enable the commissioner to determine whether the business of the licensee is being conducted in accordance with the provisions of this act and the orders, rules, and regulations issued hereunder.

b. A licensee shall notify the commissioner in writing of a change in location of records within five business days of the change.

c. A licensee shall preserve and keep available for examination by the commissioner all books, accounts, records, and other documents pertaining to its business for at least three years from the date of original entry, or a longer time as prescribed by the commissioner by regulation.

d. A licensee may, upon approval of the commissioner, keep records at a location identified by the licensee, outside this State, provided that the licensee shall make the records available in this State upon request of the commissioner.

13. a. The commissioner may investigate and examine any licensee or other person as the commissioner deems necessary to determine compliance with this act and the orders, rules, and regulations issued hereunder. For these purposes, the commissioner may examine the books, accounts, records, and other documents or matters of any licensee, maintained pursuant to section 12 of this act, or other person. The commissioner shall have the power to compel by subpoena the production of all relevant books, accounts, records and other documents and materials relative to an examination or investigation. Examinations conducted under the provisions of this act shall be confidential except as required in the administration, enforcement, and prosecution of violations under this act or pursuant to court order.

b. The commissioner or the commissioner's designee shall have power to issue subpoenas to compel the attendance of witnesses and the production of documents, papers, books, accounts, records, and other evidence in any matter over which the commissioner has jurisdiction pursuant to this act, and to administer oaths and affirmations to any person.

c. If any provider shall refuse to obey a subpoena, or to give testimony, or to produce evidence as required thereby, the commissioner may apply ex parte to any court having jurisdiction over that provider for an order compelling the appearance of the witness before the commissioner to give testimony or to produce evidence as required thereby, or both.

14. a. A provider shall:

(1) develop and implement policies and procedures to respond to questions raised by consumers and address complaints from consumers in an expedient manner;

(2) whenever a provider offers a consumer the option to receive proceeds for a fee, offer to the consumer at least one reasonable option to obtain proceeds at no cost to the consumer and clearly explain how to elect that no-cost option;

(3) before entering into an agreement with a consumer for the provision of earned wage access services:

(a) inform the consumer of their rights under the agreement; and

(b) fully and clearly disclose all fees associated with the earned wage access services;

(4) inform the consumer of any material changes to the terms and conditions of the earned wage access services before implementing those changes for the consumer;

(5) allow the consumer to cancel use of the provider’s earned wage access services at any time, without incurring a cancellation fee imposed by the provider;

(6) comply with all applicable local, State, and federal privacy and information security laws;

(7) if a provider solicits, charges, or receives a tip, gratuity, or other donation from a consumer, the provider shall:

(a) clearly and conspicuously disclose to the consumer immediately prior to each transaction that a tip, gratuity, or other donation amount may be zero and is voluntary; and

(b) clearly and conspicuously disclose in its service contract with the consumer and elsewhere that tips, gratuities, or donations are voluntary and that the offering of earned wage access services, including the amount of proceeds a consumer is eligible to request and the frequency with which proceeds are provided to a consumer, is not contingent on whether the consumer pays any tip, gratuity, or other donation or on the size of the tip, gratuity, or other donation;

(8) provide proceeds to a consumer by any means mutually agreed upon by the consumer and the provider; and

(9) if the provider will seek repayment of outstanding proceeds or payment of fees or other amounts owed, including voluntary tips, gratuities, or other donations, in connection with the activities covered by this act, from a consumer’s account at a depository institution, including by means of electronic fund transfer, the provider shall:

(a) comply with sections 1693 to 1693r of the federal “Electronic Fund Transfer Act of 1978” (15 U.S.C. s.1693 to 1693r), and regulations adopted thereunder; and

(b) reimburse the consumer for the full amount of any overdraft or non-sufficient funds fees imposed on a consumer by the consumer’s depository institution that were caused by the provider attempting to seek payment of any outstanding proceeds, fees, or other payments, in connection with the activities overseen by this act, including voluntary tips, gratuities, or other donations, on a date before, or in an incorrect amount from, the date or amount disclosed to the consumer. However, the provider is not subject to the requirements in this subparagraph with respect to payments of outstanding proceeds or fees incurred by a consumer through fraudulent or other unlawful means.

b. A provider shall not:

(1) share with an employer a portion of any fees, voluntary tips, gratuities, or other donations that were received from or charged to a consumer for earned wage access services;

(2) require a consumer’s credit report or a credit score provided or issued by a consumer reporting agency to determine a consumer’s eligibility for earned wage access services;

(3) accept payment of outstanding proceeds, fees, voluntary tips, gratuities, or other donations from a consumer by means of a credit card or charge card;

(4) charge a consumer a late fee, deferral fee, interest, or any other penalty or charge for failure to pay outstanding proceeds, fees, voluntary tips, gratuities, or other donations;

(5) report to a consumer reporting agency or debt collector any information about the consumer regarding the inability of the provider to be repaid outstanding proceeds, fees, voluntary tips, gratuities, or other donations;

(6) compel or attempt to compel payment by a consumer of outstanding proceeds or, fees, or any voluntary tips, gratuities, or other donations to the provider through any of the following means:

(a) a suit against the consumer in a court of competent jurisdiction;

(b) use of a third party to pursue collection from the consumer on the provider’s behalf; or

(c) sale of outstanding proceeds, fees, voluntary tips, gratuities, or other donations to a third-party collector or debt buyer for collection from a consumer.

(7) if the provider solicits, charges, or receives tips, gratuities, or other donations from a consumer, misleads or deceives a consumer about the voluntary nature of the tips, gratuities, or donations or represent that they will benefit any specific individuals or group of individuals;

(8) advertise, print, display, publish, distribute, or broadcast or cause to be advertised, printed, displayed, published, distributed, or broadcast, in any manner, any statement or representation with regard to the earned wage access services offered by the provider, which is false, misleading, or deceptive, or which omits material information that is necessary to make the statements therein not false, misleading, or deceptive; or

(9) impose a fee in excess of $5 in connection with a fee described in paragraph (1) of the definition of “fee” in section 2 of this act.

c. The limitations set forth in paragraph (6) of subsection b. of this section shall not preclude the use by a provider of any of the methods specified in that paragraph to compel payment of outstanding proceeds or fees incurred by a consumer through fraudulent or other unlawful means, nor do they preclude a provider from pursuing an employer for breach of its contractual obligations to the provider.

d. A provider may use the mailing address or state of residence provided to it by an individual to determine the individual’s state of residence for the purposes of this act.

15. a. A licensee shall annually file a report with the commissioner concerning the business conducted as a licensee during the preceding calendar year. The report shall be under oath and in a form and within the time as prescribed by the commissioner by regulation. The annual report shall include:

(1) gross revenue attributable to its earned wage access services;

(2) the total number of transactions in which the provider provided proceeds to consumers;

(3) the total number of unique consumers to whom the provider provided proceeds;

(4) the total dollar amount of proceeds the provider provided to consumers;

(5) the total dollar amount of fees, voluntary tips, gratuities, or other donations the provider received from consumers; and

(6) any other information the commissioner reasonably requires.

b. A licensee that fails to make and file its annual report in the form and within the time provided pursuant to this section shall be subject to a penalty of not more than $100 for each day the licensee fails to file the report, and the commissioner, as authorized pursuant to section 11 of this act may revoke or suspend the licensee’s authority to do business in this State. The penalty may be collected in a summary proceeding pursuant to the “Penalty Enforcement Law of 1999,” P.L.1999, c.274 (C.2A:58-10 et seq.). A warrant may be issued in lieu of a summons.

16. a. Notwithstanding any other provision of law, earned wage access services offered and provided by a licensee shall not be considered:

(1) in violation of or noncompliance with any law governing deductions from wages or the purchase, sale or assignment of, or an order for earned but unpaid income;

(2) a loan or other form of credit or debt, nor shall the licensee be considered a creditor, debt collector, or lender with respect thereto; or

(3) money transmission, nor shall the licensee be considered a money transmitter with respect thereto.

b. Notwithstanding any other provision of law, fees, voluntary tips, gratuities, or other donations paid in accordance with this act to a licensee shall not be considered interest or finance charges.

c. If there is a conflict between the provisions of this act and any other provision of law, the provisions of this act shall prevail.

17. Any agreement to waive any provision of this act shall be unenforceable and void.

18. The commissioner may issue and promulgate rules and regulations, in accordance with the “Administrative Procedure Act,” P.L.1968, c.410 (C. 52:14B-1 et seq.), to effectuate the provisions of this act.

19. This act shall take effect on the first day of the fourth month next following the date of enactment, except that the commissioner may take any anticipatory administrative action as may be necessary to effectuate the purposes of this act.

STATEMENT

This bill, to be known as the “New Jersey Earned Wage Access Services Act,” concerns the regulation of earned wage access services.

The bill defines earned wage access services as providing consumer-directed wage access services or employer-integrated wage access services, or both. “Consumer-directed earned wage access services” is defined as delivering to a consumer access to earned but unpaid income that is based on the consumer’s representations and the provider’s reasonable determination of the consumer’s earned but unpaid income. “Employer-integrated earned wage access services” means the business of delivering to consumers access to earned but unpaid income that is based on employment, income, and attendance data obtained directly or indirectly from an employer.

Under the bill, the Commissioner of Banking and Insurance (commissioner) will issue a license if:

(1) the applicant submits an application for a new license or for a renewal of a license;

The bill requires a license to state the name of the licensee and the licensee's principal place of business within or outside of the State, including any other information as the commissioner may require. A license will expire at the end of a license period of not less than two years or may be surrendered to the commissioner.

Further, the bill requires any sale or transfer of a controlling interest in a licensee's or applicant's business to be approved by the commissioner prior to the transfer or sale, after the licensee or applicant has provided an application which contains a written notice of the proposed sale or transfer to the commissioner. The commissioner will approve the transfer or sale unless the commissioner determines, following notice and an opportunity for a hearing, that sufficient grounds exist to deny, revoke, or suspend the license.

The bill requires every applicant for a license to prove in a form satisfactory to the commissioner, that the applicant has a net worth of at least $100,000, and has liquid assets of at least $100,000 available for the purpose of making earned wage access transactions. Every licensee is required to have at all times a net worth of at least $100,000 and shall maintain at all times assets of at least $100,000 in liquid form available for or actually used in the making of earned wage access transactions.

With respect to issuing licenses, oversight of licensees, and enforcement of the activities under the bill, the commissioner has the authority to refuse to issue and may revoke, suspend, or refuse to renew a license, or impose a penalty under certain circumstances; access and examine books, accounts, records, and other documents maintained by a licensee; conduct investigations, which may include the subpoena of witnesses and documents; bring a summary action in a court of competent jurisdiction against any person who has engaged, is engaging, or is about to engage, in any practice or transaction prohibited by the bill; impose a civil penalty not exceeding $25,000 for a violation under the bill; and order that any person who has been found to have knowingly violated any provision of the bill, be barred for a term not exceeding 10 years from acting as a provider, stockholder, officer, director, partner, or other owner, or an employee of a licensee, or acting in any other capacity.

The bill requires every licensee to identify the place of business where books, accounts, records, and other documents of the business conducted under the license, as may be prescribed by the commissioner, are maintained. If a change in location of records is made, the commissioner shall be notified in writing of the change within five business days of the change. Every licensee is required to preserve all books, accounts, records, and other documents pertaining to its business for at least three years from the date of original entry, or a longer time as prescribed by the commissioner by regulation.

Additionally, the bill establishes requirements and prohibitions for providers of earned wage access services to protect consumers. Providers are required to develop and implement policies for handling consumer questions and complaints; offer at least one reasonable option to obtain proceeds at no cost; inform consumers of their rights and fully disclose all fees before entering into an agreement; inform consumers of any material changes to the terms and conditions of earned wage access services; allow service cancellation without fees; and comply with privacy laws. Providers are also required to disclose that a tip, gratuity, or other donation amount is voluntary and provide proceeds by any means mutually agreed upon by the consumer and the provider. Providers are required to reimburse consumers for fees caused by incorrect payment attempts.

The bill prohibits providers from (1) sharing with an employer a portion of any fees, voluntary tips, gratuities, or other donations paid by a consumer; (2) using credit reports or scores to determine a consumer’s eligibility for earned wage access services; (3) accepting payment of outstanding proceeds, fees, voluntary tips, gratuities, or other donations by means of a credit card or charge card; (4) charging late fees, deferral fees, interest, or any other penalty or charge resulting from a failure to pay; (5) reporting unpaid balances to a consumer reporting agency or debt collector; (6) engaging in aggressive collection practices such as lawsuits or third-party debt sales; (7) misrepresenting the voluntary nature of the tips, gratuities, or donations or representing that they will benefit any specific individuals or group of individuals; (8) false or misleading advertising; and (9) imposing fees exceeding $5 in certain circumstances. However a provider may compel payment of outstanding proceeds or fees incurred by a consumer through fraudulent or other unlawful means, or from pursuing an employer for breach of its contractual obligations to the provider.

Finally, the bill requires licensees to annually file a report with the commissioner concerning the business conducted as a licensee during the preceding calendar year. Failure to file the annual report will incur a penalty of not more than $100 for each day's failure and the commissioner may revoke or suspend the licensees’ authority to do business in this State.

A depository institution or trust company is not subject to the provisions of the bill.