There are many more examples like these and they all demonstrate how California likes to be first when it comes to consumer protection legislation. This is especially true when it comes to enacting new protections for workers. Despite being three hours behind the East Coast and being our country’s most populous state, California has positioned itself as a laboratory for ideas that other states look to after they take the lead.
California’s approach to regulating earned wage access (EWA) is no exception. Recently, the state finalized the country’s first-ever set of EWA industry rules done via a multi-year regulatory process. While there are five states that license EWA as its own financial product that became law via legislation, California’s regulator, the Department of Financial Protection & Innovation (DFPI) became the first state financial administrative body to draft, amend, and ultimately adopt an EWA regulation outside of the usual legislative process.
Specifically, in November 2024 DFPI signaled that EWA should be available to their residents, as long as they comply with new product-specific consumer protections, and register and continue to share user activity data.
With the final regulations going into effect next month, DFPI is offering a guiding light for how other states can handle an industry that is essential to millions of working people across the country.
It also sends a clear message that a traditional lending regulatory regime for EWA is not the right approach. Under the new regulations, no lending license is needed, no price controls are placed on the industry’s already zero or low cost transaction fees, and no annual percentage rate (APR) calculations or disclosures are required. Though the regulations classify EWA as credit, the label is simply that—one without much significance or any related requirements.
Instead, the DFPI’s regulations put in place first-of-its-kind exceptions that differentiate EWA from harmful credit products, which aligns with the fact that DailyPay’s on-demand pay solutions do not look like loans to our actual users. This makes sense—given that EWA companies, including ours, feature no recourse to the user, no interest payments, no late fees, no origination fees, and no credit checks or screenings.
There is of course much to disagree with in the finalized rule, given that some provisions are so confusing that they need to be fixed via a legislative or regulatory process of some kind. But the overall approach is a step in the right direction. It is a balanced rule that both protects consumers and allows the EWA industry to continue to operate and grow.
It’s important to note that this major step for a burgeoning industry came following a careful and thoughtful regulatory process that began in 2020, a year before the first draft regulations were even proposed in 2021. DFPI’s rulemaking process was importantly informed by actual data of EWA user activity. In 2020 and 2021, the DFPI signed landmark Memorandums of Understanding with companies including DailyPay, that created a quarterly data collection program that is now codified under the new regulations as annual reporting.
California’s example demonstrates that the time has come to regulate EWA. Its proliferation and growing importance to everyday, working Americans has made this unavoidable. EWA will only continue to grow in popularity, thanks in large part to it being fee-free or low cost to consumers and its simplicity as a financial tool.
Limiting EWA platforms would have driven Californians to more costly and predatory financial options like credit cards, late payments, and other even more risky alternatives. In addition, regulating EWA as a loan would have codified into law an incentive for all EWA providers to charge new and higher fees like origination fees that no EWA provider charges today. Many state lending laws are similar.
In 2025, state lawmakers and regulators have an opportunity to mirror California’s example and help advance financial empowerment and inclusion for hard working Americans who are struggling to access the liquidity they need. As is its custom, California has lit the path forward for other states that are looking to go next. More states following would be to the benefit of hard-working Americans everywhere.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the views or positions of any entities they represent, including DailyPay, LLC.
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