Indiana 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 approved the legislation (HB 1125) on May 6, 2025. The law imposes licensing and other substantive requirements on providers. It will be administered by the Division of Consumer Credit within the Department of Financial Institutions. The law also provides greater regulatory certainty for these innovative financial services in the state. Indiana joins Arkansas, 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 without a license from engaging in the business of providing earned wage access services to a consumer or advertising, soliciting, or holding itself out as offering or providing earned wage access services to a consumer. The term "consumer" includes an individual who resides in the state. It also includes an individual who requests proceeds in Indiana, as determined by a provider using a legal, readily available commercial means of determining the individual's location. Among other details, applicants must submit to the department information about the applicant and its executive officers, directors, managers, and principal owners that is necessary to evaluate their and the applicant's professional training and experience, financial responsibility, character, and fitness, so as to warrant a belief that the provider's business will be operated honestly and fairly. An applicant must also post a surety bond. The director is authorized to use the Nationwide Multistate Licensing System & Registry for all aspects of licensing. The initial licensing and annual renewal fees will each be $1,500, unless different fees are established by the department.
The law does not apply to federal or state-chartered banks, credit unions, savings and loan associations, trust companies, corporate fiduciaries, savings associations, savings banks, industrial banks, or industrial loan companies having federal or private deposit insurance.
Indiana also excludes from the definition of the term "provider" any entity that reports a consumer's payment or nonpayment of outstanding proceeds, fees, or tips to consumer reporting agencies (as defined in the Fair Credit Reporting Act). This exclusion could incentivize an entity to furnish information to consumer reporting agencies, because such conduct could enable the entity to avoid the substantive requirements applicable to providers through the law. Given that earned wage access services typically do not involve consumer repayment obligations, an entity offering such services should carefully consider the basis of any such report about a consumer's payment or nonpayment and exercise caution, because a number of other states expressly prohibit such reporting.
Notices of Changes
A licensee adding or replacing a key individual (such as an officer, director, or manager) must provide a detailed after-the-fact notice, which is subject to disapproval by the director of the department. Additionally, a correcting amendment must promptly be filed with the department if the information provided in its license application or renewal application becomes inaccurate or incomplete in a material respect. The law also requires applications to the department for prior written approval of changes of control of a licensee. A license is not transferable or assignable without the department's approval.
Department's Powers
The department may examine and investigate licensees and persons believed to be operating without the required license. It may also administer, interpret, and enforce the law; promulgate rules to implement the law; and recover the cost of administering and enforcing the law through fees and costs associated with applications, examinations, investigations, and other actions under the law.
Periodic Reports
The law requires providers to submit quarterly composite reports relating to earned wage access transactions in the state. Renewal reports are also required in connection with the annual renewal process.
Conduct Requirements
The law imposes substantive conduct requirements on providers, including:
- No credit reports. Providers may not obtain credit reports to determine a consumer's eligibility for earned wage access services, the amount of proceeds a consumer may request, or the frequency with which proceeds are provided to a consumer.
- 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 earned wage access services.
- Free option. Whenever a provider offers a consumer the option of receiving proceeds 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. The provider may not set any option that has a fee associated with the delivery of proceeds as the default option. The provider must clearly display the no-cost option and explain to the consumer how to elect the no-cost option. If a consumer elects the no-cost option, the provider must initiate the delivery of the proceeds to the consumer no later than one business day after the consumer initiates the transaction.
- Delivery methods. Providers may provide proceeds to a consumer by any means mutually agreed upon by the consumer and provider.
- Small-loan limitations. If the provider also offers small loans to consumers, the provider may not provide proceeds to a consumer who has an outstanding small loan from that provider, and it may not make a small loan to a consumer who has outstanding proceeds from that provider.
- Capped delivery fees. Fees for delivery or expedited delivery of proceeds to a consumer may not exceed $5 or 5% of the proceeds, whichever is greater.
- 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:
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- Suggest a default tip greater than $0
- Not increase any fee charged to a consumer because the consumer elected not to pay a tip
- Clearly and conspicuously disclose immediately prior to each transaction that a tip is voluntary and may be $0
- Refrain from representing that tips benefit any specific individuals
- Refrain from misleading consumers about the voluntary nature of tips
- 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, the frequency proceeds are provided to a consumer, and the level or cost of services provided to the consumer) is not contingent on the size of the tip or whether a consumer tips at all
- Advertising restrictions. If a user has elected not to receive them, a provider's software application may not subject the user to unsolicited email advertisements or surveys or electronic advertisements or surveys based on the consumer's use of the application, location, or behavior. Without the user's election or authorization, the software application also may not display unsolicited electronic notifications to the user or access a user's location (except for purposes of verifying that a user is located in Indiana at the time the user creates an account with the provider). Any data received from a provider in connection with these provisions may not be sold or shared except in limited circumstances.
- Selling or sharing data. A provider must sell or share consumer data with a licensed small-loan lender. The requirements to sell and share consumer data appear to be a drafting error.
- No credit card or charge card payments. Providers may not accept payments of outstanding proceeds, fees, or tips from consumers via credit card.
- No interest or late fees. Providers may not charge or collect late fees, interest, or other penalties for a consumer's failure to pay outstanding proceeds, fees, or tips.
- No sharing fees or tips with employers. Providers may not share with an employer any 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 compel or attempt to compel a consumer to pay outstanding proceeds, fees, or tips through making unsolicited outbound telephone calls to the consumer; bringing a lawsuit against the consumer; using a third party to pursue collection from the consumer; or selling outstanding amounts to a third-party collector or a debt buyer for collection from the consumer.
Relation to Other Laws
The new law clarifies that earned wage access services provided by a licensee in compliance with the new law are not loans or money transmission and are not considered violations of laws governing deductions from payroll or the sale or assignment of, or an order for, earned but unpaid income. It also clarifies that fees (including expedited delivery fees, subscription or membership fees, and fees paid by an employer on the consumer's behalf to entitle the consumer to receive proceeds at reduced or no cost to the consumer) and tips for such services are not considered interest or finance charges.
Compliance Timelines
The law becomes effective January 1, 2026. The law does not include a grandfathering provision.
Next Steps
Providers should promptly evaluate their systems, procedures, and disclosures for compliance with Indiana's new requirements. Providers should also be prepared to apply promptly for a license. Familiarity with Indiana'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. To learn more about this law and how it may affect your business, or to discuss other aspects of earned wage access services, please contact Alexander J. Callen at acallen@goodwinlaw.com or (202) 346-4161.
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