New York State introduces bill deeming EWA a loan

• Key insights: New York State Senator Samra Brouk and Assemblymember Steven Raga introduced the Stop Taking Our Pay Act, or STOP, in Albany, New York on Tuesday. 
• What's at stake: The proposed legislation comes on the heels of a federal law that would limit state's ability to designate earned wage access as credit. 
• Forward look: If passed, the law would designate any fee paid in connection with the advance, including tips and subscription costs, as finance charges. 

ALBANY, NEW YORK — In front of the Assembly Staircase in the New York state capitol building, Jose Bedoy, 34, described their experience using earned wage access. 

It "swept me into an obfuscated cycle of debt," Bedoy said. 

Bedoy spoke in front of a small crowd of community groups and financial institutions in Albany on Tuesday, where lawmakers announced the Stop Taking Our Pay Act, or STOP Act, a bill targeting earned wage access providers. 

The bill was introduced by New York State Senator Samra Brouk (D) and Assemblymember Steven Raga (D), and proposes that any wage or cash advances be considered loans and subject to the state's 16% interest rate cap. It also would classify any fee paid in connection with the advance, including tips and subscription costs whether compulsory or voluntary, as finance charges. If passed, it would take effect immediately, and cement New York as the third state, along with Connecticut and Maryland, to designate EWA as credit. 

"Nobody anywhere… especially during these times, needs to put down 300% to 700% in interest, to just have access to your paycheck. Nobody," Raga said. "These big tech finance apps are finding ways and loopholes around [interest rate laws]. This bill will codify and make sure that in New York state, if you are giving money and you expect a repayment, it's called a loan." 

Bedoy said they first used earned wage access in 2020 during the pandemic, to make up for lost income as a food delivery driver after their hours were cut. Before they knew it, they were tapping their provider for funds on a regular basis. 

"I always thought of myself as too clever to fall for payday loans," they said. "Yet here I was. I got got from the comfort of my own bed. It's demoralizing to know that you invited a felon into your home, and that you've given them access to your bank account." 

It wasn't until Bedoy lost his job that he was able to stop using paycheck advance services. 

"I couldn't tell you [how much I was spending on fees]," Bedoy said. "It was part of just being defeated. I was like, 'Give me the money now and take whatever you're going take.'" 

Supporters and opponents

A coalition of financial institutions have also joined consumer advocacy groups in supporting the legislation. 

"Predatory online lenders say they're offering people access to capital they couldn't otherwise get by letting them access their paycheck early," Amanda Trainer, special projects coordinator at Brooklyn Cooperative Federal Credit Union, said at the press conference.

"Community credit unions just like ours exist around the state, working with community community members who need small dollar loans and lines of credit to get through life's emergencies," Trainer said. "That's the kind of access to capital people need, reasonably priced with helpful staff who care about their long term well being. 

"As a credit union, our loans are highly regulated and cap at the 16% interest. And we never asked for a tip," Trainer said.

Rochester-based Genesee Coop Federal Credit Union is also part of the coalition that supports the bill, CEO Dan Apfel told American Banker in a phone interview. 

"We believe that it's important to try and create a more financially just financial system and that regulation should be in place to protect our members and our communities from predatory lending," Apfel said. "We've done a lot of work trying to prevent predatory lending from coming to New York and to improve regulation, while also making it viable for banks and credit unions to do the responsible lending that helps our communities." 

Lawmakers are hoping to push the bill through with the New York State budget ahead of its April 1 deadline, Andy Morrison, associate director of the New Economy Project, a New York-based advocacy group, told American Banker in an interview on Tuesday. 

"You're always trying to get a [two-for-one]. If you can get it in the budget, great, and that way it's front loaded on the session, it gets the attention it needs, and it can pass potentially through the budget process," Morrison said. "But there's a limited number of policies that can pass through the budget process, and then everything else is, not officially, but effectively, sort of on hold." 

The bill drew criticism from the American Fintech Council, an industry group that lobbies on behalf of earned wage providers. 

"We have been working closely with Assemblyman Vanel and Senator Cooney and appreciate their leadership on behalf of thousands of families who rely on responsible earned wage access products," Phil Goldfeder, a former New York State Assemblyman and CEO of the AFC, told American Banker. 

"More than a dozen states and the Consumer Financial Protection Bureau have made it clear that responsible EWA is not a loan and should not be regulated as such," Goldfeder said. "This last-minute approach by out of touch 'advocacy groups' is a last-ditch attempt to undo the momentum of New Yorkers who actually use these products, who will not be fooled or deterred from accessing financial tools they need." 

How we got here

Last year, New York Gov. Kathy Hochul signed a law regulating the BNPL industry with the 2025 budget. 

The two-page bill faces potential challenges in the face of a proposed federal law that would prevent earned wage access from being designated as credit and prevent states from classifying it as such. New York Attorney General Letitia James has previously taken the stance that EWA is a credit product. 

"This proposal is not surprising to those in the industry since the New York Attorney General has taken the position that EWA services are loans," Carlin McCrory, an associate at Troutman Pepper Locke, told American Banker. 

New York State is also known for its heavy tilt and aggressive focus on consumer protections, Eamonn Moran, a partner at Holland & Knight, told American Banker.  

"This could be an interesting showdown as state regulatory and legislative developments heat up on the consumer protection front and draft federal legislation containing broad preemption terms that would essentially nullify a state legislative effort like this one," Moran said. 

"This also underscores the patchwork compliance challenges faced by EWA providers doing business across the nation, as different states consider and implement new (and sometimes competing) regulatory frameworks, unless and until a federal law is enacted that creates a level playing field in the sector," he said.