DFR urges caution on earned-wage access as Vermont committee weighs H99; H34 reported favorably

Montpelier — At a Jan. 31 meeting of the Commerce & Economic Development Committee, Aaron Farris, deputy commissioner of banking at the Department of Financial Regulation (DFR), told lawmakers that earned-wage access products "are probably loan products of some sort" under existing guidance and federal law and urged either statutory changes or formal regulatory guidance before Vermont adopts a new legal framework.

The committee heard from Farris for about 40 minutes on H99, a bill that would create a specific framework for employer-integrated earned-wage access (EWA) products. Farris urged caution: "we are not against innovation or new ways offering that service, but we do like to practice innovation with caution," and recommended explicitly requiring that expedite fees and tips be included in the finance charge if the committee moves forward with the bill.

Why it matters: EWA services allow workers to access earned wages before payday, often for an "expedite" fee. Regulators and consumer advocates disagree on whether the fees and user charges should be treated as interest or simple service fees; that legal classification determines whether the products must comply with state lending statutes and usury limits, and whether companies must obtain a licensed-lender authorization.

DFR told the committee it has seen two employer-integrated models in Vermont: one company obtained a license in 2024 and another received a no-action letter because the vendor did not advance its own funds (the employer advanced funds to the employee). Farris said, "we have not received any complaints about any company or the service in general." He described three options facing the committee: (1) enact H99 to create a bespoke statutory regime for EWA; (2) do nothing and allow DFR to issue guidance and require providers to seek licensing under existing licensed-lender law; or (3) revise the general licensed-lender statutes (Title 9/9 VSA) to modernize how these short-term, employer-integrated products are treated.

On legal classification, Farris cited recent CFPB guidance and the Truth in Lending Act as the federal context that makes these products likely to be credit transactions when fees are tied to receipt of funds. He recommended working with legislative counsel to add explicit statutory language that ties expedite fees and tips into the finance charge and warned that an unrelated change to general licensing language in the draft could have "a much larger trickle down effect" that would need correction.

Committee members asked how the APR would be calculated when repayment timing varies. Farris pointed to the Truth in Lending Act and said providers should base APR disclosures on the expected time the advance will be outstanding. He also confirmed DFR lacks reliable data on unlicensed operations and largely learns of market entrants through licensing applications and consumer complaints.

Members discussed consumer benefits and risks. Some legislators said EWA can help people in short-term need, while others raised concerns about repeat use, consumer harm, and whether the model effectively charges workers for access to wages they have already earned. The committee also discussed possible reporting requirements, limits for repeat users, and placing a sunset on any new statute so the legislature can review outcomes after a trial period.

Votes at a glance

- H34 — motion to report favorably on H34 as introduced; the committee recorded a roll-call series of "yes" votes. Motion offered and seconded on the floor of the committee; the clerk called the roll and the members listed in the record voted in the affirmative. (See Actions section for the transcript roll-call names.)

What happens next: The committee scheduled additional testimony on H99 for the next hearing and asked DFR and other agencies to provide suggested statutory edits, data and comparative summaries from other states. The committee also expects to hear from AARP, banking representatives and other stakeholders at upcoming sessions.

Direct quotes in this article are attributed to witnesses who spoke on the record at the Jan. 31, 2025 Commerce & Economic Development Committee meeting in Montpelier.