Vermont lawmakers consider regulations for employee cash advance services amid lender licensing debates

Vermont's House Commerce Committee is considering new regulations for companies offering wage advance services, following a detailed discussion on January 31, 2025. The committee is evaluating whether these services should be classified as loans, which would subject them to stricter oversight under state law.

During the meeting, officials clarified that a second company involved in wage advances does not require a lender's license because it facilitates advances using funds directly from employers, not its own. This distinction is crucial as it impacts how these transactions are regulated. The Department of Financial Regulation (DFR) indicated that if no legislative action is taken, they would likely issue guidance categorizing these advances as loans, thereby bringing them under regulatory authority.

The conversation also touched on the fees associated with cash advances, comparing them to credit card cash advances, which do not have a statutory limit on fees in Vermont. The committee members expressed concerns about the lack of transparency and regulation in the current wage advance market, noting that without action, companies could operate without oversight, potentially leading to high annual percentage rates (APRs) for consumers.

The DFR emphasized the importance of establishing a clear regulatory framework to protect consumers and ensure fair practices in the wage advance industry. They noted that while there have been no significant complaints so far, the evolving nature of these services and recent federal guidance necessitate a proactive approach.

As the committee deliberates, they face a critical decision: to create a regulatory structure that could either enhance consumer protections or risk driving some companies out of the Vermont market. The outcome of this discussion will significantly impact how wage advance services operate in the state and the protections available to consumers seeking immediate financial assistance.