Substitute Senate Bill No. 1396 seeks to amend Connecticut's laws regarding earned but unpaid wage or salary income advances by repealing Section 36a-555 and introducing new definitions and regulations for small loans. Key insertions include the definitions of "earned but unpaid wage or salary income" and "earned but unpaid wage or salary income advance," which clarify the nature of these financial products. The bill establishes that such advances can be offered to borrowers with amounts up to fifty thousand dollars and an APR exceeding twelve percent, while also mandating that providers develop policies for borrower inquiries, offer no-cost options, and ensure transparency regarding finance charges and borrower rights. Additionally, it prohibits certain practices, such as sharing finance charges with employers and requiring credit reports for eligibility, to enhance consumer protection.

The legislation also introduces provisions that exempt certain salary advances from the small loan law's APR and finance charge requirements, allowing these advances to exceed the 36% APR cap but imposing a maximum finance charge of $5 per advance or $30 per 30-day period. It includes technical changes, such as exempting wages paid directly by employers from the small loan lending law's scope, and anticipates a fiscal impact with costs estimated at $112,456 in FY 26 and $145,608 in FY 27. The bill empowers the banking commissioner to enforce compliance with the new standards, which are set to take effect on October 1, 2025, and aims to provide clarity and fairness in the small loan market while protecting borrowers from excessive charges and aggressive collection practices.

Statutes affected:
Raised Bill:
BA Joint Favorable:
File No. 291: