Maryland has enacted a law that establishes a financial-services oversight regime for earned wage access services, also known as on-demand pay services, which allow workers to access earned but unpaid income before payday. The governor allowed the bill to be enacted without veto under Article II, Section 17(c) of the Maryland Constitution. The law creates a new Subtitle 15 within Title 12 of the Commercial Law, which imposes licensing and other substantive requirements on providers. Following unfavorable August 1, 2023 guidance regarding earned wage access services from the Office of Financial Regulation, the law also provides greater regulatory certainty for these innovative financial services in the state. Maryland joins Arkansas, Indiana, Kansas, Missouri, Nevada, South Carolina, Utah, and Wisconsin, each of which have adopted similar legislation. California has also adopted regulations (but not laws) for earned wage access services.
Licensing and Exemptions
The law prohibits a person from engaging in the business of providing earned wage access services to a consumer without a license. License requirements are under existing Maryland law found in the Maryland Consumer Loan Law — Licensing Provisions (Title 11, Subtitle 2 of the Financial Institutions Article). The licensing requirements do not apply to banks, trust companies, savings banks, credit unions, or savings and loan associations. A license is not transferable.
Commissioner's Powers
The commissioner may adopt regulations to carry out the new law. Failure to obtain a license may subject a provider to enforcement action.
Annual Reports
On or before July 1 each year, a provider must submit an annual report to the Office of Financial Regulation that includes information prescribed by regulation as necessary to assess the size and status of the earned wage access market in Maryland.
Conduct Requirements
The law imposes substantive conduct requirements on providers, including:
- No credit reports. Providers may not obtain credit reports to qualify a consumer for earned wage access services.
- Consumer disclosures. Before entering into an agreement with a consumer, a provider must inform the consumer of their rights under the agreement and fully and clearly disclose all fees associated with the earned wage access services.
- Free option. Whenever a provider offers a consumer the option to receive earned wage access for a fee or solicits a tip, the provider must offer the consumer at least one reasonable option for obtaining earned wage access at no cost to the consumer. The provider must also clearly explain to the consumer how to elect the no-cost option.
- Delivery methods. Providers may provide proceeds to a consumer by any means mutually agreed upon by the consumer and provider.
- Capped delivery fees. Fees for delivery or expedited delivery of earned wage access may not exceed $5.00 for an advance of proceeds of $75.00 or less, or $7.50 for an advance of proceeds of more than $75.00.
- Compliance with other laws. Providers must comply with all local, state, and federal privacy and information security laws, and providers who seek payment from a consumer's account at a bank must comply with the applicable provisions of the Electronic Fund Transfer Act.
- Tip practices. Providers who solicit, charge,
or receive tips must:
- Set the default tip, if any, to zero
- Refrain from conditioning a consumer's ability to obtain earned wage access on the consumer's ability or willingness to pay the provider a tip
- Clearly and conspicuously disclose immediately prior to each transaction that a tip is optional and voluntary
- Clearly and conspicuously disclose immediately prior to each transaction that any tip paid does not inure to the direct benefit of any specific employee of the provider or any other individual
- Clearly and conspicuously disclose in their service contracts with the consumer that tips are voluntary and that the offering of earned wage access services (including the amount of proceeds a consumer may request and the frequency proceeds are provided to a consumer) is not contingent on whether a consumer tips or the size of the tip
- No interest or late fees. Providers may not receive interest; or charge late fees, interest, or other penalties for a consumer's failure to pay proceeds, fees, or tips.
- No sharing fees or tips with employers. Providers may not share with an employer any fees (including expedited delivery fees and subscription or membership fees) or tips received from a consumer for earned wage access.
- Overdraft fees. A provider who seeks payment from a consumer's account at a bank must reimburse the consumer's overdraft or nonsufficient-funds fees caused by the provider in certain circumstances.
- No debt reporting or collection. Providers may not report a consumer's failure to pay proceeds, fees, or tips to a consumer reporting agency, or compel or attempt to compel a consumer to pay proceeds, fees, or tips through using a third party to pursue collection from a consumer; sell or assign outstanding amounts to a third-party collector or a debt buyer for collection; or taking civil action against the consumer.
Relation to Other Laws
The new law clarifies that earned wage access services provided in compliance with the new Maryland law are not money transmission, or a violation of or noncompliance with Maryland's laws governing deductions from payroll, salary, wages, compensation, or other income or the purchase, sale, assignment, or order for unpaid but earned wages. The new law also states that a licensed earned wage access provider that is subject to the new law is exempt from other provisions of Maryland law governing lending, credit, or debt; however, it also adds a potentially conflicting section to the Maryland Consumer Loan Law — Credit Provisions (Title 12, Subtitle 3 of the Commercial Law) specifying that consumer-directed earned wage access is subject to the Maryland Consumer Loan Law — Credit Provisions. The law also amends Maryland's existing consumer lending statutes, such as by inserting provisions addressing the treatment of interest and tips with respect to consumer loans.
Compliance Timelines
The law becomes effective October 1, 2025. The law does not include a grandfathering provision.
Next Steps
Providers should promptly evaluate their systems, procedures, and disclosures for compliance with Maryland's new requirements. Providers should also be prepared to apply promptly. Familiarity with Maryland's law is also important for industry participants because this law, along with laws and regulations in other states, may shape similar legislation pending in other states.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
