BILL NUMBER: S4355
SPONSOR: BAILEY
 
TITLE OF BILL:
An act to amend the banking law, in relation to on-demand pay providers
 
PURPOSE:
To provide regulatory clarity for on-demand pay providers so New York
workers can have flexible access to their pay.
 
SUMMARY OF PROVISIONS:
The bill creates a new article under the banking law entitled "On-Demand
Pay Providers" with the following sections: definitions; employer-inte-
grated on-demand pay providers; non-verified on-demand pay providers;
certain on-demand pay services to be considered loans; penalties. Among
other things, the bill delineates certain registration requirements.
 
JUSTIFICATION:
On-demand pay represents the most innovative and significant payroll
development since the advent of direct deposit. It enables employees to
view and access some or all their wages as they are earned, as opposed
to at the end of the payroll period. On-demand offers part-time workers
and low-income employees a way to pay for unexpected expenses without
resorting to payday loans and credit cards that come with high interest
rates. Over the next five years, on-demand pay is expected to grow from
6 percent market penetration to 30 percent.
There are two primary types of on-demand pay providers: employer-inte-
grated on-demand pay providers and non-verified on-demand pay providers.
For the first type, an employer contracts with a pay provider to enroll
the company's employees and integrates with its payroll systems to track
an employee's accrued pay so that it can offer that employee access to
their verified accrued pay. A non-verified on-demand pay provider does
not verify an employee's pay through an employer contract. Instead, it
contracts directly with the employee to deliver funds in a more consist-
ent manner with lending practices. Employees receiving employer-inte-
grated on-demand pay services report substantial savings from avoiding
overdraft fees, predatory loans and late fees, improved financial health
and reduced financial anxiety. In addition, employers who offer this
benefit report turnover reduction and increased productivity on account
of improved employee financial wellness.
Since on-demand pay is a new payroll system, regulatory clarity is
necessary. Employer-integrated on-demand pay providers need to comply
with privacy, transparency and other relevant standards to protect an
employee's right to control their pay. Non-verified on-demand pay
providers need to comply with applicable credit regulations since their
services are like lending practices. This bill provides that fees and
interest charged for such loans shall not exceed 10 percent.
 
LEGISLATIVE HISTORY:
2021-22: S7898 - Referred to Banks
2023-24: S2186 - Referred to Banks
 
FISCAL IMPLICATIONS:
None
 
EFFECTIVE DATE:
On the ninetieth day after becoming a law, with immediate provisions for
rule implementation.