Senate hearing on earned-wage access highlights risks of fee-driven advances; advocates seek fee caps and default-zero tips

The Senate Financial Institutions, Insurance and Technology Committee heard hours of testimony on Senate Bill 117, which would create a regulatory framework for earned-wage access (EWA) services in Ohio. Witnesses included consumer advocates who oppose the bill in its current form and industry-related experts who said regulation is needed but described technological solutions to prevent overextension.

Monica Burks, policy counsel for the Center for Responsible Lending, told the committee that EWA and similar ‘‘paycheck advance’’ products frequently put low- and moderate-income workers into cycles of repeat usage and high fees. Citing a research dataset of about 214,000 transactions, Burks said almost half of consumers in that dataset were ‘‘stacking’’ advances across multiple apps, and that a small share of users account for a large share of revenue. ‘‘We found that about 40% of the people in our dataset are responsible for 86% of the advances taken,’’ she said, and added that many consumers use advances for recurring needs such as food and transportation rather than one-time emergencies.

Burks said examples of cost structures include DailyPay average advances of about $20 with fees around $5.99, and that expedite fees to receive funds same-day are paid by most users because many Americans cannot wait one to two business days. She recommended capping per-transaction fees, capping solicitation of tips and adding monthly caps on total consumer charges. Burks also noted that Ohio’s 2018 payday-lending reforms—described in testimony as ‘‘the fair lending law you passed in 2018’’—give consumers more time to repay small loans and limit finance charges, and she urged similar guardrails for EWA.

Tori Hollingsworth, executive director of the Ohio Community Development Corporation Association, also opposed the bill as drafted. OCDCA urged the committee to distinguish employer-sponsored and employer-integrated EWA products from direct-to-consumer advances, and to adopt guardrails for direct-to-consumer and employer‑integrated services. Hollingsworth recommended a fee cap and setting the default gratuity to $0, citing state examples: Georgia caps per-transaction fees at $5; Kentucky uses a sliding scale across multiple monthly transactions; Nevada and Maryland require default zero tips.

Danielle Delio Spires, policy advocate with the Ohio Poverty Law Center, recommended classifying EWA advances as loans in order to bring them under existing lending laws and Truth in Lending protections. She noted a July 2024 CFPB interpretive rule stating that certain paycheck-advance products should be considered consumer loans and said that would trigger additional protections such as disclosure requirements and rate limits.

John Barnes, vice president of government affairs for Catalyst Regulatory and Compliance, described technological, regulatory options to limit ‘‘advance stacking’’ on the direct-to-consumer side. Barnes recommended a centralized, real‑time tracking database that would let providers check outstanding advances across platforms and block transactions that would exceed limits; he said the service can operate for a small per-transaction cost and is already used in other states. Barnes told senators that a major direct-to-consumer provider had 200,000 Ohio users and that the California study showed an average user takes advances about 36 times a year; he said direct-to-consumer businesses do not have employer payroll visibility, which creates the risk of stacking across multiple providers.

Committee members asked detailed operational questions: senators sought clarification on who receives tips, what typical tip amounts are, whether employer-integrated products are fee-free when sponsored by an employer, and whether artificial-intelligence regulatory developments could affect state-level consumer protections. Witnesses generally agreed employer-integrated products (offered through an employer) differ from direct‑to‑consumer products (which obtain access to a user’s bank account) and that guardrails focused on direct-to-consumer advances are a primary concern.

No committee vote on Senate Bill 117 occurred at this hearing; members heard opponent and interested-party testimony and were urged to consider fee caps, default-zero gratuities, classification of advances as credit, monthly caps on consumer charges, and technical solutions to detect or block stacking.