Substitute Senate Bill No. 1396, also known as Public Act No. 25-155, establishes new definitions and regulations concerning "earned but unpaid wage or salary income" and related income advances for borrowers in Connecticut. The bill repeals Section 36a-555 and introduces terms such as "earned but unpaid wage or salary income advance," which refers to small loans based on unpaid wages. It clarifies the role of providers who facilitate these advances and outlines the conditions under which such loans can be made. Additionally, the bill modifies existing language by expanding the definition of "finance charge" to include various fees associated with small loans and updating the definition of "small loan" to include advances based on earned but unpaid wages. The effective date for these changes is set for October 1, 2025.

The legislation also imposes stricter regulations on small loans, including limits on annual percentage rates (APRs) for loans under $5,000 (capped at 36% APR) and loans between $5,000 and $50,000 (capped at 25% APR). Providers of earned but unpaid wage or salary income advances must offer at least one no-cost option for borrowers and clearly disclose any finance charges. The bill prohibits prepayment penalties, adjustable rate provisions, and aggressive collection methods, while also mandating that repayment schedules align with the borrower's next paycheck. Overall, the bill aims to enhance consumer protection in the small loan market, ensuring fair lending practices and access to necessary financial resources for borrowers.

Statutes affected:
Raised Bill:
BA Joint Favorable:
File No. 291:
APP Joint Favorable:
Public Act No. 25-155: