Hartford Business Journal

HARTFORDBUSINESS.COM | FEBRUARY 19, 2024 25 FOCUS | BANKING & FINANCE this is a nefarious industry, similar to the payday industry, that it is taking advantage of customers," Goldfeder said. "These are responsible, inno- vative companies that come up with new technology that makes it easy to calculate how much money you have earned to this point, and how much money you are due. I don't think it's unfair — similar to how banks charge fees — to charge a fee for the service that consumers want." How it works California-based EarnIn – a popular earned wage access provider – allows customers to access up to $100 a day, and up to $750 per pay period. Customers who want their funds immediately pay a $3.99 fee for an expedited "Lighting Speed" option. Those who skip the convenience fee wait one to three days for funds to hit their accounts. About half of EarnIn's customers also leave voluntary tips — averaging $1.47 — that do not impact avail- ability or quality of service, according to EarnIn, which responded to several questions from the Hartford Business Journal. Last year, the company served around 2 million customers nation- wide, including about 20,000 Connecticut residents. But not anymore. EarnIn withdrew its service from the state as of Dec. 31, a day before the Department of Banking was due to begin enforcing the legislative changes adopted last year. The changes to the annual percentage rate formula put EarnIn's fees multiple times over Connecticut's 36% APR limit. A subsequent lobbying campaign by EarnIn urged its users to write to regulators and lawmakers, prompting thousands of complaints to the Department of Banking and a smaller number to legislators. "Earned Wage Access (EWA) has provided a safe and cost-effective way for consumers with short-term liquidity needs to access their own wages without having to utilize high-interest financial products like payday loans, cash advances, and credit cards," EarnIn said in a state- ment. "EWA is a no-risk financial solu- tion for consumers, providing access to one's own earnings. It is not a loan, has no mandatory fees, and avoids negatively impacting credit scores." EarnIn has met some legal troubles. In 2021, for example, the company agreed to a multimil- lion-dollar federal class-action lawsuit settlement, which claimed the compa- ny's marketing misled customers, who ended up with hefty bank over- draft fees when EarnIn attempted to withdraw funds from their accounts. States weigh in State Rep. Jason Doucette (D-Manchester), a co-chair of the General Assembly's Banking Committee, said he convinced Banking Commissioner Jorge L. Perez to delay implementation of the statute changes from Oct. 1 to Jan. 1, after hearing concerns from earned wage access companies and their customers. He said there will be a bill this legis- lative session to address confusion about whether earned wage access services constitute a loan. Doucette said he's more comfort- able with earned wage access providers that act in concert with employers. Direct-to-consumer options are really payday loans and should be subject to Connecticut's small loan rules, he said. "Like a payday loan, people may go and use this product frequently," Doucette said. "When they use the product frequently, they are going to have lots and lots of fees and tips that really add up to a high APR, whether they realize it or not. The point is really consumer protection and providing some reasonable limits on fees and APR. We are going to do that with respect to this product as well. And make the determination of whether what is being done is properly considered a loan or not." Some consumer advocacy groups agree with Doucette. They argue that direct-to-consumer earned wage access programs are just a modernized twist on payday lending, attempting to sidestep regulation. John Earlingheuser, director of advocacy and community outreach for AARP Connecticut, said California-based studies of direct-to-consumer options show charges amounting to more than 300% APR. A June 2023 Harvard Kennedy School study on earned wage access noted that while tips are voluntary, some providers default users to tip a certain percentage of a transaction. "So, to claim it's not a payday loan is just misleading," Earlingheuser said. "I'm not concerned about losing a product that takes an average worker's credit situation and just makes it worse." Miranda Margowsky, a spokes- woman for the Financial Tech- nology Association, another Washington, D.C.-based trade association, said earned wage access is not a loan, citing the industry standard of optional fees and no penalties. "APR is not the right measure for these products because it is a measure of a credit product, and there is no interest rate with earned wage access," Margowsky said. "So, I would say it's not accurate to compare a $1 or $2 fee that is voluntary to a mandatory interest rate that might compound over time. It's just fundamentally different." Other state legislatures have recently passed laws impacting the industry. Nevada and Missouri last summer adopted laws treating earned wage access like a service, not a loan. Providers are required to be licensed in those states. They also face restrictions much like those the American Fintech Council already demands of its members – including no late fees, clarity that tips are voluntary and no recourse against clients who don't pay up. California regulators are consid- ering regulating earned wage access providers much like Connecticut. 33 Main Street, Old Saybrook, CT 06475 "Every day approximately 900,000 people walk into a Chase branch to cash a check, make a deposit or speak to one of our experts about an important financial decision that could impact their lives," said Jennifer Roberts, CEO of Chase's consumer banking business. "This investment means we can continue to have branch locations that reflect the unique needs of the communities we aspire to serve today, tomorrow and for many years to come." Expanding footprint Chase Bank has been aggressively expanding its branch network in Connecticut in recent years, while many other banks have trimmed their brick-and-mortar footprints. As of June 30, 2023, Chase had 60 Connecticut branches with $9.7 billion in deposits, making it the fourth-largest bank operating in the state, behind Bank of America, Webster Bank and M&T Bank, according to Federal Deposit Insurance Corp. data. Over a one-year period — from June 30, 2022 to June 30, 2023 — Chase Bank added a net six branches in the state, while the 52 banks operating in Connecticut overall closed a net 36 branches, a 3.6% decrease. Most of those closures were attributed to M&T Bank, which shuttered a net 26 branches during that one-year period, following its acquisition of Bridgeport-based People's United Bank. Five years earlier, as of June 30, 2018, Chase Bank had 49 branches in Connecticut with $5.7 billion in deposits, making it the sixth-largest bank in the state at the time, FDIC data shows. Miranda Margowsky Continued from page 23 Chase Bank

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