Earned wage access provider FlexWage has received notice from the Vermont Department of Financial Regulation that it doesn’t need a lender or money transmitter license to operate in the state.

FlexWage won the carve-out from Vermont based on certain aspects of how it provides the EWA services, including that it works through employers to provide its services and that it caps the fees exacted from employees, according to an April 4 letter from the department to the company shared with Payments Dive.

The letter, addressed to FlexWage CEO Frank Dombroski, also cited the fact that FlexWage doesn’t offer a subscription service, and doesn’t charge additional fees to provide expedited payments, given all payments are made “instantly.”

The Scottsdale, Arizona-based company also won a similar carve-out in Connecticut earlier this year.

FlexWage is among dozens of companies getting into the business of providing employees with access to their earned wages before their regularly scheduled payday. There are a variety of different business models offered in the market, with a variety of different ways in which the companies impose charges and make money. Some companies’ EWA services are offered directly to employees, and many of the workers are part of the gig economy.

In FlexWage’s case, it offers its services by way of a contract with employers, and the employers may choose to pay for the services so that the employees don’t bear additional expense.

Lawmakers and regulators have become increasingly concerned about the possibility of employees being overly burdened by fees associated with accessing their pay via EWA services.

Indeed, states across the country are passing laws related to EWA, with some instituting regulations that treat EWA like lending and others taking less restrictive approaches. Last month, Wisconsin became the third state to pass a law requiring that earned wage access providers be licensed, but it left such payments unregulated under lending laws.

By contrast, California and Connecticut have taken a different tack, moving to subject EWA payments to lending laws that have provisions for policing interest rates and transparency.

The Consumer Financial Protection Bureau has also expressed interest in regulating the industry, saying it’s in sync with California’s approach.

By Lynne Marek on April 15, 2024
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