Senate Commerce Committee Statement to Senate, No. 866 — State of New Jersey (January 27, 2020)

Summary

The Senate Commerce Committee of the State of New Jersey, in a statement dated January 27, 2020, reports favorably Senate Bill No. 866, which sets requirements for earned income access services, the delivery to a consumer of earned but unpaid income. A provider must work through a contract with an obligor, which deducts the advance from the consumer's next paycheck, and may not contract to have the consumer repay directly. Providers must follow the civil and criminal usury laws and the federal "Truth in Lending Act," and the services are to be considered a loan, with fees counted as interest. Violations carry a penalty of not more than $5,000 for each violation.

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SENATE COMMERCE COMMITTEE

STATEMENT TO

SENATE, No.
866

STATE
OF NEW JERSEY

DATED: JANUARY
27, 2020

The Senate Commerce Committee reports favorably Senate
Bill No. 866.

This
bill creates certain requirements for earned income access services. Under the
bill, “earned income access services” means the delivery of funds to a consumer
that represent earned but unpaid income.

The
bill requires an earned income access service provider to offer earned income
access services through a contractual arrangement with an obligor in which the
provider delivers earned income to the consumer prior to the date on which the
obligor is scheduled to pay the consumer, and the obligor deducts the amount of
the earned income delivered by the provider to the consumer from the consumer’s
next paycheck.

The
bill provides that an obligor may not share information with the earned income
access service provider pertaining to the obligor’s accrued and expected
obligations to the consumer unless:

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

(2) the
consumer consents to sharing that information.

The
bill prohibits an earned income access service provider from entering into a
contractual arrangement with a consumer that permits delivery of earned income
directly to the consumer that is to be repaid directly by the consumer to the
person.

Under
the bill, the imposition of a fee on a consumer who opts to use the services of
an earned income access service provider is not in violation of current law
prohibiting deductions from an employee’s wages, provided that the consumer is
informed in writing of the right to receive the full amount of the consumer’s
wages, without discount, if the consumer waits until the regular payday.

The
bill requires an earned income access service provider to comply with:

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

(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" and the regulations implementing that
act, to provide any disclosures required for closed-end loans.

For
purposes of the bill, earned income access services are to be considered a
loan, even if those services are provided without recourse. Any fees or other
required or optional contributions 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 also provides that any person who violates any provision of the bill is
liable for a penalty, in addition to any other penalty imposed by law, of not
more than $5,000 for each violation.

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