Senate Commerce Committee Statement to Assembly, No. 3450 (3R) — State of New Jersey (December 16, 2021)

Summary

Statement of the Senate Commerce Committee, State of New Jersey, dated December 16, 2021, reporting favorably and with committee amendments Assembly Bill No. 3450 (3R). As amended, the bill sets requirements for earned income access service providers and establishes an Office of Earned Income Access Services in the Division of Banking to regulate those services for a 24-month initial period. It defines earned income access services as delivering earned but unpaid income to a consumer, which should not be considered a loan. A provider may not charge a consumer more than two times in any week unless a no-fee option is offered, and must refund overdraft fees caused by the provider's withdrawals. Non-compliant services are subject to usury laws and the federal "Truth in Lending Act." The statement says the bill is identical to Senate Bill No. 3611.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

[Third Reprint]

ASSEMBLY,
No. 3450

with
committee amendments

STATE
OF NEW JERSEY

DATED: DECEMBER
16, 2021

The Senate Commerce Committee reports favorably and
with committee amendments Assembly Bill No. 3450 (3R).

As amended, this bill creates certain requirements for
earned income access service providers and establishes within the
Division of Banking in the Department of Banking and Insurance an Office of
Earned Income Access Services to regulate earned income access services for a
24-month initial period pursuant to the provisions of the bill.

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 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 or consumer, in which the provider:

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

(2) delivers
earned income to the consumer prior to the date on which the obligor is
scheduled to pay the consumer and the amount of the earned 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.

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, does not violate certain provisions of current law,
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.

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, 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.

The bill provides that an earned income access service
provider is to, at the time earned income access services are offered, provide
a consumer with a statement, the language of which is to be determined by the
commissioner, explaining that the office oversees the regulation of earned
income access services providers and including the number and purpose of the
telephone hotline established pursuant the bill.

Under the bill, if an earned income access service
provider makes a withdrawal on a consumer’s account, prior to the next
regularly scheduled payday, that results in the imposition of fees on the
consumer, including an overdraft or non-sufficient funds fee, the provider
shall refund the fees to the consumer upon adequate notice and proof by the
customer.

In addition, an earned income access service provider
is not to charge a consumer for earned income access services more than two
times in any week except there is to be no limit on earned income access
services when the consumer is given an option for funds to be delivered without
a fee.

Earned
income access services that do not comply with section 3 of the bill are to be
considered a loan, even if those services are provided without recourse, and
any fees or other contributions of 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.

The
bill requires providers to submit to the department certain information during
the 24-month initial period. Under the bill, the department is required
to conduct a study, during the first 12 months of the 24-month initial period,
concerning industry practices, consumer demand, benefits, and cost compared to
other similarly available products, and actors in the earned income access
services industry and to issue the report to the Governor and the Legislature.
The department is also required to review and analyze, prior to the termination
of the initial 24-month period, the benefits and risks to consumers during the
initial provider registration period.

As amended
and reported, this bill is identical to Senate Bill No. 3611, as also amended
and reported by the committee.

COMMITTEE AMENDMENTS:

The committee amended the bill to:

(1) establish within the Division of Banking in the
Department of Banking and Insurance an Office of Earned Income Access Services
to regulate earned income access services for a 24-month initial period
pursuant to the provisions of the bill;

(2) establish a telephone hotline for consumers to
file complaints concerning providers of earned income access services;

(3) require providers to provide certain information
to consumers concerning the Office of Earned Income Access Services and the
telephone hotline established pursuant to the bill;

(4) provide that, if an earned income access service
provider makes a withdrawal on a consumer’s account, prior to the next
regularly scheduled payday, that results in the imposition of fees on the
consumer, the provider is to refund the fees to the consumer upon adequate
notice and proof by the customer;

(5) prohibit an earned income access service provider
from charging a consumer for earned income access services more than two times
in any week and establishing that there is to be no limit on earned income access
services when the consumer is given an option for funds to be delivered without
a fee;

(6) require the department to conduct a study, during
the first 12 months of the 24-month initial period, concerning industry
practices, consumer demand, benefits, and cost compared to other similarly
available products, and actors in the earned income access services industry
and issue the report to the Governor and the Legislature;

(7) require the department to review and analyze,
prior to the termination of the initial 24-month period, the benefits and risks
to consumers during the initial provider registration period;

(8) require earned income access service providers to
provide certain information to the department every six months; and

(9) change the definition of “earned income access
service provider.”

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