[US] Is Earned Wage Access Reaching a Critical Juncture?

Analysis by Michael Baer 

Can employees, under certain programs, access their pay ahead of the scheduled payday? Yes. Voluntary programs are being set up by a growing number of employers with third-party vendors to provide at least some already-earned amounts to workers on their demand before payday—if they want it that way.  

Is allowing workers to change the payday themselves, to draw amounts before the employer-scheduled pay cycle is finished, considered a loan? And why does this determination matter?  

Opposing Conclusions on EWA Status  

Those advocating for this type of earned wage access (EWA, but also called on-demand pay and early wage access) say it is a new financial tool and not a loan because it is based on the employee’s accrued earnings, money that already is the employee’s but simply is disbursed differently and ahead of the normally-scheduled payday.   

But some view the programs differently. They claim that since the technology allowed employees to receive money (albeit, based on their earned wages) prior to employers sending out pay on payday, this was not access to wages, but simply a unique way of providing loans to cover individuals until payday.  According to this school of thought, EWA is a consumer loan.  

In 2017, the Consumer Financial Protection Bureau (CFPB) mentioned that such arrangements possibly were not credit and not necessarily subject to loan requirements as covered by the Truth in Lending Act (TILA). But, in 2024, under a Biden Administration proposal, the CFPB stated many such arrangements, particularly those that apply transaction and other fees to employees, likely are subject to TILA requirements.  

So, it seemed like the U.S. government, at least under the previous administration, was deciding that EWA is credit and not simply a way employees can get their earnings faster, on their time. The question is settled, right? 

Not so fast.  

With the Trump Administration now in office, the CFPB's proposed position concerning EWA is on hold, with a high probability that it will be rescinded. 

Also, just within the past three years, several states—including Utah and Arkansas this year—have passed laws to govern EWA, and these states take the position that the arrangements are not loans.  

Other states are taking up the issue in this year’s legislative sessions. A bill (AB 258)  introduced in the New York legislature, if passed, could also take a similar approach on the status of EWA.  

The New York Attorney General, however, recently made it known to the EWA provider community that the position of her office on the matter is that EWA is a loan. Such a move would mean the EWA programs offered by several companies violate state law, particularly the state’s usury laws, for not adhering to loan-making protocols.  

A Case for EWA? 

In this environment, one large EWA provider, in business for ten years with operations across the country, recently filed suit to circumvent what they claim is an effort by the New York Attorney General to unilaterally declare their program a loan operation, subject to the state’s lending laws (DailyPay LLC v. James, S.D.N.Y., No. 25-02849, April 7, 2025). 

The suit calls for a declaratory judgment, a decision that could determine if DailyPay’s arrangement under New York law should be considered a loan or not a loan.  

According to the DailyPay claim, the New York Attorney General’s Office (OAG) “has elected to designate itself as both legislator and regulator in the absence of applicable laws and regulations and, in effect, has declared all EWA products to be illegal regardless of their business model.” 

Why Does This Matter to EWA Providers and Employees? 

Being declared credit in New York could negatively impact employees benefitting from the existing EWA arrangements, according to DailyPay. 

The requirements to allow employees to participate would dramatically change from a relatively simple sign-up process to a drawn-out credit application and approval protocol, delaying the ability to get much-needed funds into the hands of those requesting a payout. And that is if the company chooses to modify its business model to continue to operate and adhere to loan servicing requirements. 

If declared as credit, employees using such programs would possibly be subject to negative credit disclosures, a practice currently banned in several of the states with EWA laws. 

DailyPay and other providers currently disclose fee amounts in dollars. Should the New York Attorney General’s initiative get finalized, it would mean a far greater burden in providing conversions to interest rates when presenting the costs under the law.    

Converting into an interest rate a small, flat one-time fee, which DailyPay applies for near-instant draws on pay (next business day requests are free), is incredibly complicated.  

The interest rate would wildly vary with each transaction, depending upon how much an employee accessed, the fee amount, and how many days to payday the access occurred. An amount accessed five days before payday would have an interest rate less than the same amount with the same fee accessed two days before payday.  

Litigation Threat 

According to the lawsuit, DailyPay claims that in January, the OAG put the company on notice that their program “is a loan that violates state usury laws and wage assignment laws by charging interest beyond the statutory limit.” The suit claims that DailyPay was told to treat its programs as loans or face litigation from the OAG office.  

There was a meeting between the OAG and DailyPay in February. After that meeting, the OAG did not indicate it would rescind its notice, only stating that it would not enforce its position until April 4. 

DailyPay argues that the terms of their program "clearly state that it is not intended to create any debt obligation owed by a worker".

“There is no interest that is calculated based on the amount or timing of a transfer.” No credit application is required and no reporting to credit bureaus, the DailyPay claim said. 

The fee charged for the optional expedited transfer is the only fee DailyPay charges for its on-demand pay product, and, according to the claim, is akin to an ATM transfer. The employees retain sole discretion over whether to use the expedited process and pay a small fee, or wait, usually a normal business day, for funds to transfer at no cost. 

“A transfer of earned pay cannot become a loan simply because an employer offers the service using DailyPay’s platform,” said the claim. 

DailyPay seeks a declaratory judgment that its programs do not violate state or federal law. What “the OAG proposes to do... would interfere with workers’ ability to access their own money, their earned pay, the opposite of what the Legislature intended.” 

There has been no public response from the New York Attorney General’s Office on this suit. 

Author: Michael Baer

Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page. 

Analysis by Michael Baer 

Can employees, under certain programs, access their pay ahead of the scheduled payday? Yes. Voluntary programs are being set up by a growing number of employers with third-party vendors to provide at least some already-earned amounts to workers on their demand before payday—if they want it that way.  

Is allowing workers to change the payday themselves, to draw amounts before the employer-scheduled pay cycle is finished, considered a loan? And why does this determination matter?  

Opposing Conclusions on EWA Status  

Those advocating for this type of earned wage access (EWA, but also called on-demand pay and early wage access) say it is a new financial tool and not a loan because it is based on the employee’s accrued earnings, money that already is the employee’s but simply is disbursed differently and ahead of the normally-scheduled payday.   

But some view the programs differently. They claim that since the technology allowed employees to receive money (albeit, based on their earned wages) prior to employers sending out pay on payday, this was not access to wages, but simply a unique way of providing loans to cover individuals until payday.  According to this school of thought, EWA is a consumer loan.  

In 2017, the Consumer Financial Protection Bureau (CFPB) mentioned that such arrangements possibly were not credit and not necessarily subject to loan requirements as covered by the Truth in Lending Act (TILA). But, in 2024, under a Biden Administration proposal, the CFPB stated many such arrangements, particularly those that apply transaction and other fees to employees, likely are subject to TILA requirements.  

So, it seemed like the U.S. government, at least under the previous administration, was deciding that EWA is credit and not simply a way employees can get their earnings faster, on their time. The question is settled, right? 

Not so fast.  

With the Trump Administration now in office, the CFPB's proposed position concerning EWA is on hold, with a high probability that it will be rescinded. 

Also, just within the past three years, several states—including Utah and Arkansas this year—have passed laws to govern EWA, and these states take the position that the arrangements are not loans.  

Other states are taking up the issue in this year’s legislative sessions. A bill (AB 258)  introduced in the New York legislature, if passed, could also take a similar approach on the status of EWA.  

The New York Attorney General, however, recently made it known to the EWA provider community that the position of her office on the matter is that EWA is a loan. Such a move would mean the EWA programs offered by several companies violate state law, particularly the state’s usury laws, for not adhering to loan-making protocols.  

A Case for EWA? 

In this environment, one large EWA provider, in business for ten years with operations across the country, recently filed suit to circumvent what they claim is an effort by the New York Attorney General to unilaterally declare their program a loan operation, subject to the state’s lending laws (DailyPay LLC v. James, S.D.N.Y., No. 25-02849, April 7, 2025). 

The suit calls for a declaratory judgment, a decision that could determine if DailyPay’s arrangement under New York law should be considered a loan or not a loan.  

According to the DailyPay claim, the New York Attorney General’s Office (OAG) “has elected to designate itself as both legislator and regulator in the absence of applicable laws and regulations and, in effect, has declared all EWA products to be illegal regardless of their business model.” 

Why Does This Matter to EWA Providers and Employees? 

Being declared credit in New York could negatively impact employees benefitting from the existing EWA arrangements, according to DailyPay. 

The requirements to allow employees to participate would dramatically change from a relatively simple sign-up process to a drawn-out credit application and approval protocol, delaying the ability to get much-needed funds into the hands of those requesting a payout. And that is if the company chooses to modify its business model to continue to operate and adhere to loan servicing requirements. 

If declared as credit, employees using such programs would possibly be subject to negative credit disclosures, a practice currently banned in several of the states with EWA laws. 

DailyPay and other providers currently disclose fee amounts in dollars. Should the New York Attorney General’s initiative get finalized, it would mean a far greater burden in providing conversions to interest rates when presenting the costs under the law.    

Converting into an interest rate a small, flat one-time fee, which DailyPay applies for near-instant draws on pay (next business day requests are free), is incredibly complicated.  

The interest rate would wildly vary with each transaction, depending upon how much an employee accessed, the fee amount, and how many days to payday the access occurred. An amount accessed five days before payday would have an interest rate less than the same amount with the same fee accessed two days before payday.  

Litigation Threat 

According to the lawsuit, DailyPay claims that in January, the OAG put the company on notice that their program “is a loan that violates state usury laws and wage assignment laws by charging interest beyond the statutory limit.” The suit claims that DailyPay was told to treat its programs as loans or face litigation from the OAG office.  

There was a meeting between the OAG and DailyPay in February. After that meeting, the OAG did not indicate it would rescind its notice, only stating that it would not enforce its position until April 4. 

DailyPay argues that the terms of their program "clearly state that it is not intended to create any debt obligation owed by a worker".

“There is no interest that is calculated based on the amount or timing of a transfer.” No credit application is required and no reporting to credit bureaus, the DailyPay claim said. 

The fee charged for the optional expedited transfer is the only fee DailyPay charges for its on-demand pay product, and, according to the claim, is akin to an ATM transfer. The employees retain sole discretion over whether to use the expedited process and pay a small fee, or wait, usually a normal business day, for funds to transfer at no cost. 

“A transfer of earned pay cannot become a loan simply because an employer offers the service using DailyPay’s platform,” said the claim. 

DailyPay seeks a declaratory judgment that its programs do not violate state or federal law. What “the OAG proposes to do... would interfere with workers’ ability to access their own money, their earned pay, the opposite of what the Legislature intended.” 

There has been no public response from the New York Attorney General’s Office on this suit. 

Author: Michael Baer

Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page.