OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
H.B. 553 Bill Analysis
135th General Assembly
Click here for H.B. 553’s Fiscal Note
Version: As Introduced
Primary Sponsors: Reps. Williams and Upchurch
Effective date:
Logan Briggs, Attorney
SUMMARY
▪ Requires businesses that provide earned wage access (EWA) services to register with the
Division of Financial Institutions within the Department of Commerce.
▪ Establishes a process through which a business may apply for a certificate of registration.
▪ Requires investigations and background checks for applicants and key officers.
▪ Regulates the operation of businesses providing EWA services.
▪ Establishes consumer rights and protections.
▪ Prohibits local fees and assessments related to EWA services.
DETAILED ANALYSIS
Earned wage access services
Background
Earned wage access (EWA) services are a financial tool by which a “provider” gives a
“consumer” an advance on “earned but unpaid income,” i.e., salary, wages, compensation, or
other income that the consumer has earned or accrued in exchange for the provision of services
to an employer, but for which the consumer has not been paid by the employer. In other words,
EWA services allow consumers to receive their pay on-demand, rather than waiting for their next
paycheck. Such an advance may include income earned for services performed on an hourly,
project-based, piecework, or other bases, or where the consumer acts as an independent
contractor. Once that consumer receives their paycheck, they (or their employer) are required to
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repay the proceeds received as advance income. Typically, the EWA provider charges a fee in
exchange for providing such an advance.1
EWA services may be either “consumer-directed” or “employer-integrated.” In a
consumer-directed EWA transaction, a consumer makes an agreement directly with a provider.
The consumer discloses how much earned but unpaid income they have accrued and, if the
provider accepts that amount as legitimate, the provider may agree to loan the consumer that
amount (or a lesser amount). Once the consumer receives their paycheck, they must repay the
amount received from the provider (referred to by the bill as “proceeds”), plus any fees charged
by the EWA provider, by an agreed-upon date.2
In an “employer-integrated” EWA transaction, an EWA provider receives employment
and income data directly from an employer, as opposed to the consumer. Generally, employer-
integrated EWA services involve agreements where the employer automatically pays the
provider the consumer’s wages. Employer-integrated EWA services typically involve longer-term
agreements between employers and providers and, often, the employer pays any fees associated
with the service.3
Registration requirement and procedures
The bill prohibits any company from providing EWA services without receiving a
certificate of registration from the Division of Financial Institutions within the Department of
Commerce. The bill defines “company” as a business entity other than an individual or sole
proprietorship, including a firm, business trust, partnership, limited liability company,
association, corporation, or general partnership. Individuals and sole proprietorships are not
permitted to register as EWA providers and, accordingly, appear to be barred from providing
EWA services.
The Superintendent of Financial Institutions may require companies to utilize the
Nationwide Multistate Licensing System (NMLS) to apply for or renew certificates of registration;
to collect information regarding the company and its key officers; to conduct background checks
using criminal fingerprint history, civil or administrative records, or credit history; and to establish
other registration requirements as necessary. The bill also permits the Superintendent to set or
reset renewal and reporting dates, establish requirements for amending or surrendering a
registration, and to engage in any other activities that the Superintendent considers necessary
for participation in the NMLS.4
Application and fees
The bill requires a company registering as an EWA service provider to submit a written
application, under oath, in the form prescribed by the Division. The application must include an
1 R.C. 1320.01(C), (E), (F), (G), and (M).
2 R.C. 1320.01(D) and (L).
3 R.C. 1320.01(H).
4 R.C. 1320.01(B) and 1320.02.
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affirmation that the EWA service provider will abide by the requirements of the bill and contain
all other information required by the Superintendent. If the applicant is a foreign corporation,
the applicant must first obtain and maintain a license to conduct business under the Ohio Foreign
Corporation Law.
The bill requires applicants to pay a nonrefundable $300 annual registration fee and a
nonrefundable $200 investigation fee. If the application necessitates an investigation outside of
Ohio, and it appears that the actual expenses of conducting the investigation will exceed $200,
the Division may require the applicant to advance sufficient funds to pay those expenses. The
Division is required to furnish the applicant with an itemized statement of all investigation fees
in excess of $200.
If the $300 annual registration fee is not sufficient to cover the estimated expenditures
of the Consumer Finance Section of the Division in administering and enforcing the EWA law, the
bill allows the Superintendent to assess an additional fee on each registrant. The additional fee
must not exceed ten cents for each $100 of fees, tips, gratuities, and donations received by a
registrant during the previous calendar year. Furthermore, the bill prohibits the fee from being
less than $250 per registrant, or more than $2,000 per registrant. The additional fee is due on
the last day of June.5
Investigation
The bill requires the Division to conduct an investigation of each applicant comprising of
both a civil and criminal records check of the key officers of that applicant. The bill defines “key
officer” as the chief executive officer, chief financial officer, or chief compliance officer. The
Superintendent may also require a civil and criminal background check of other persons that have
authority to direct and control the applicant’s operations. As part of the required criminal history
records check, the Superintendent must request criminal record information from the Federal
Bureau of Investigation (FBI). In addition, the Superintendent must request that the Bureau of
Criminal Identification or an approved vendor conduct a criminal records check based on the
applicant’s, key officer’s, or other person’s fingerprints, or, if their fingerprints are unreadable,
their Social Security number. All fees associated with the background check must be paid by the
applicant.6
Missing information
The bill permits the Superintendent to treat an application as withdrawn if it does not
contain all of the required information, the Superintendent requests the information in writing
(including by fax or electronic transmission), and the applicant fails to provide the missing
information to the Division within 90 days after that request is sent. The same procedures
concerning missing information apply to registration renewals.7
5 R.C. 1320.03(A)(1), (A)(2), and (B).
6 R.C. 1320.01(J) and 1320.03(A)(3) and (4).
7 R.C. 1320.03(A)(5) and (8).
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Net worth and assets
An applicant seeking registration as an EWA provider must maintain a net worth of at
least $50,000, alongside assets of at least $50,000, either in use or readily available for use as
part of conducting business for each certificate of registration.8
Approval or denial of application
If the Division determines that the applicant meets all requirements prescribed by statute
and rule, and that the applicant has the financial responsibility, experience, and general fitness
to command confidence of the public that the business will be operated honestly and fairly, the
Division must issue a certificate of registration to the applicant. The bill prohibits the
Superintendent from using a credit score as the sole basis to deny registration.
Conversely, if the Division finds that the applicant does not meet the requirements
prescribed by statute and rule, the Division must deny the application. Upon making such a
determination, the division must send the applicant notice of the denial, including an explanation
of why the application was denied and of the applicant’s opportunity to appeal under the
Administrative Procedure Act.9
Expiration and renewal
Certificates of registration expire annually on December 31. An EWA provider may renew
the provider’s registration by filing a renewal application and paying a $300 annual registration
fee on or before that date. The bill prohibits the Superintendent from approving the renewal of
a registration if the applicant is subject to an order of suspension, revocation, or an unpaid and
past due fine or assessment.10
Reciprocity
The bill provides reciprocity for companies which hold a license or registration to offer
EWA services in other states. If the company pays all applicable fees and assessments, the bill
requires the Division to issue it a certificate of registration.11
Change in ownership
If a registered EWA provider’s ownership changes by 5% or more, the Division may
investigate the company to determine whether that change results in conditions which would
have warranted a denial of the application for registration. If so, the Division may revoke the
company’s certificate of registration.12
8 R.C. 1320.03(D).
9 R.C. 1320.03(A)(6) and (10).
10 R.C. 1320.03(A)(7), (8), and (9).
11 R.C. 1320.03(C).
12 R.C. 1320.03(A)(11).
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Location of business
A registered EWA provider may offer EWA services online or at one or more physical
places of business in Ohio. A provider may receive more than one certificate of registration, but
it may only receive one certificate for each place of business. If a registrant wishes to move their
place of business to a different municipal corporation, it must file a new application and pay the
requisite fees, including an investigation fee if required by the Superintendent. However, an
applicant may move location within the original municipal corporation or change the name of
the business as long as they provide written notice to the Division, which in turn must provide a
new certificate for the new name or address at no cost.13
Required actions
The bill requires EWA providers to comply with several process requirements related to
the provision of EWA services. These include requirements related to disclosures, consumer
rights, repayment, and statutory compliance.
Disclosures
The bill requires the following disclosures related to the provision of EWA services:
▪ A provider must fully and clearly disclose all fees associated with the EWA services prior
to entering into an agreement with a consumer;
▪ A provider must inform a consumer of any material changes to the terms and conditions
of the EWA services before implementing those changes;
▪ If a provider solicits, charges, or receives a tip, gratuity, or other donation from a
consumer, it must clearly and conspicuously disclose to the consumer that the tip or
gratuity amount may be zero, and is voluntary;
▪ A provider must disclose in its service contract with a consumer and elsewhere that tips
or gratuities are voluntary and that the offering of EWA services, including the amount of
proceeds a consumer is eligible to request and the frequency with which proceeds are
provided to a consumer, is not contingent on whether the consumer pays any tip or
gratuity, or its size.14
Consumer rights
The bill imposes the following requirements upon EWA service providers related to
consumer rights:
▪ A provider must develop and implement policies and procedures to respond to questions
raised by consumers and address complaints from consumers in an expedient manner;
13 R.C. 1320.03(E).
14 R.C. 1320.05(C)(2), (D), and (G).
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▪ A provider must offer at least one reasonable option to obtain proceeds at no cost to
consumers and clearly explain how to elect that no-cost option;
▪ A provider must inform a consumer of the consumer’s rights under an agreement for the
provision of EWA services prior to entering into the agreement with a consumer;
▪ A provider must allow the consumer to cancel use of the provider’s EWA services at any
time, without incurring a cancellation fee or penalty;
▪ A provider must provide proceeds to a consumer by means mutually agreed upon by the
consumer and the provider.15
Repayment
The bill requires a provider that seeks repayment of outstanding proceeds, fees, tips,
donations, or gratuities from a consumer’s depository institution to comply with the federal
Electronic Funds Transfer Act and all related regulations. Furthermore, if a provider attempts to
recover the wrong amount of funds, or attempts to recover the funds on a date other than the
date disclosed to the consumer in the EWA service agreement, the provider must reimburse the
consumer for any overdraft or nonsufficient funds fees charged by the consumer’s depository
institution as a result of that error. The bill’s requirements do not apply when a consumer’s
outstanding amounts or fees were incurred through fraudulent or otherwise unlawful means. 16
Compliance with state, local, and federal law
The bill expressly requires providers to comply with all applicable local, state, and federal
privacy and information security laws.17
Prohibited actions
The bill prohibits EWA providers from doing any of the following:
▪ Share with employers any fees, tips, or other proceeds charged to or received from a
consumer for EWA services;
▪ Require a consumer’s credit report or credit score provided or issued by a consumer
reporting agency to determine the consumer’s eligibility for EWA services;
▪ Accept payment of any outstanding proceeds, fees, or other donations from a consumer
by means of a credit card or charge card;
▪ Charge any late fees, interest, or other penalties for a consumer’s failure to pay
outstanding proceeds, fees, or other donations;
15 R.C. 1320.05(A), (B), (C)(1), (E), and (H).
16 R.C. 1320.05(I).
17 R.C. 1320.05(F).
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▪ Report to any consumer reporting agency or debt collector any information about a
consumer’s inability to repay outstanding proceeds, fees, or other donations;
▪ If a provider solicits, charges, or receives a tip, gratuity, or other donation from a
consumer, a provider may not mislead or deceive consumers about the voluntary nature
of the tips or gratuities, or make representations that tips or gratuities will benefit any
specific individuals.
In addition, a provider must not compel or attempt to compel a consumer to pay
outstanding proceeds, fees, or other donations by bringing a civil action against the consumer in
court, by using a third party to pursue collection from the consumer, or by selling the outstanding
amounts to a third-party debt collector or debt buyer. However, this does not preclude other
lawful means from collecting outstanding amounts from a consumer, or from enforcing the terms
of a contract between a provider and employer if the employer breaches its obligations. So while
a provider may not bring a civil action against a consumer for nonpayment, it may do so against
an employer with which it has a contractual agreement.18
Recordkeeping and reports
The bill requires EWA service providers to maintain books, accounts, and records with
respect to EWA services that will enable the Division to d