Washington, DC – After decades of protecting borrowers from high-cost, payday lenders, Maryland lawmakers are poised to eliminate longstanding consumer protections in a bill that lets nonbank earned wage advance (EWA) lenders create an industry-defined financial category that allows them to charge triple-digit interest rates and unlimited junk fees on payday-style loans to hardworking consumers.

There is ample evidence, including new research released today, showing that using fintech loan apps can lead low wage, low wealth borrowers to even greater financial distress, including an increase in the number of repeat bank overdrafts.

The acceptance of this industry-created legal fiction would allow EWA lenders to evade regulatory oversight and charge interest rates of more than 100 percent APR for loans consumers take against their upcoming paycheck.

“Despite industry claims, earned wage advances are loans,” said Whitney Barkley-Denney, deputy director of state policy and senior policy counsel at the Center for Responsible Lending. “Borrowers get money from a bank, not their own paychecks. For many of these lenders, there is no relationship with the employer at all. This bill allows for endless reborrowing, unlimited monthly fees, and makes Maryland the only rate-cap state to welcome these lenders with open arms instead of common-sense guardrails.”

Worse, with a cap of only $3.50 per transaction on expedite fees, the proposed bill will allow lenders to charge unlimited additional payments disguised as tips and subscriptions, among other fees, on loans that can create a debt trap that borrowers typically use 36 times a year according to recent research.

When she introduced HB 246 in late January, Commissioner of Labor Portia Wu said the department’s bill would ensure that EWA products continue to be covered by Maryland’s consumer disclosure laws. “The Department strongly believes that Earned Wage Access products act functionally as loans and therefore must be subject to the same regulatory requirements and guardrails as other consumer and payday loan products,” said Wu. “Any fees charged to workers for paycheck cash advances should be transparent and subject to existing limits on high-interest loans.”

Four weeks ago, Commissioner of Financial Regulation Anthony Salazar said in a finance committee hearing that language in a similar bill under consideration should not form “a new, separate regime for EWA products because of the potential risk of harm to consumers.”

But HB 246 was hijacked by big-spending fintech industry lobbyists and their legislative allies. Using an American Legislative Exchange Council (ALEC)-backed template that has been rejected by every other rate-cap state, the strong regulatory scheme created by HB 246 was replaced by fintech lenders’ preferred new language that says EWA financing is not a loan, creating a safe harbor that allows lenders, including those from out of state, to charge excessive fees that require consumers to pay to be paid.

“If this bill is adopted, Maryland will have given payday and other nonbank lenders a green light to exploit working people struggling from paycheck to paycheck,” Barkley-Denney said.


Press Contact: Alfred King alfred.king@responsiblelending.org