Maryland is set to regulate earned wage access services, making them more accessible to residents, after Gov. Wes Moore said this week in a letter to House Speaker Adrienne Jones that he will allow a bill the General Assembly passed to become law without his signature.
But in the same letter, Moore also warned that the products, often referred to by the abbreviation EWA, can send consumers into a “debt cycle,” and he warned that the legislation exempts EWA from the state’s anti-discrimination protections.
EWA products allow workers to get a portion of their paycheck before payday, either directly from their employer or through a third-party app.
“Let's say I'm a working, single dad. I got a birthday party Saturday for my son. It's gonna cost about $250 for the party,” Baltimore City Del. Marlon Amprey, one of the bill’s sponsors, explained during a legislative hearing in March. “My car breaks down. I need 200 bucks now to make the week work. So what these models offer is you can go online, you can borrow this $200 just for that week, and you can pay them back the next week.”
The legislation creates regulations that supporters say allow EWA products to operate profitably in Maryland while also protecting consumers. These protections include a requirement that all EWA providers offer users a way to get their cash without fees and clearly explain how to use that free option. They can charge a fee for getting cash instantly, but the legislation caps the fee at $5 for up to a $75 cash advance and at $7.50 for anything larger.
Providers can also solicit voluntary tips or donations, but the default tip amount must be zero. The amount of tip a user leaves cannot affect the amount of money they can access, and providers cannot mislead consumers about tips.
Amprey described the ability to leave tips as “a First Amendment right.” However, Moore took issue with providers’ ability to solicit tips.
“[I]t is my view that soliciting tips for a loan in any form is inappropriate,” he wrote.
EWA services are effectively rebranded payday loans — high-interest, short-term loans that trap people into cycles of debt - Wilson Meeks, assistant attorney general in the consumer protection division of the Maryland Attorney General’s Office warned in testimony submitted to the legislature.
He wrote that someone taking out a 10-day loan could pay at least a 243% interest rate for a loan less than $75 and a 273% interest rate for a $100 loan, not including other tips or fees.
“To provide an example of the negative impact on a low-income consumer, a user of EWA products who earns $25,000 in a year and obtained 25 advances in a quarter would pay 2-3% of their entire gross take-home pay in fees to EWA lenders, simply to get their money a few days early,” Meeks wrote.
EWA providers make their money from repeat users, said Whitney Barkley Denney, deputy director of state policy and senior policy counsel at the Center for Responsible Lending.
“They take out maybe $50 or $100 before payday, payday comes around, they don't have the $50 or $100 on payday, so they need to borrow it again,” she said. “And so we get into these patterns of repeat use and repeat re-borrowing.”
People who use third-party apps — which go by names such as Brigit, EarnIn and Payactiv — can also stack loans by borrowing from multiple providers simultaneously.
“So when payday comes around, instead of having $100 out, you actually have two or $300 out that you then have to somehow replace in your paycheck, so you're just creating this ongoing deficit in the paycheck,” Barkley Denney said.
Moore echoed some of these concerns in his letter. The lack of limit on the amount someone can borrow “can quickly result in a debt cycle for consumers and would leave lenders unable to reclaim the loan and fees.”
He also raised concerns about which Marylanders tend to rely on EWA apps.
The Maryland Department of Labor’s Office of Financial Regulation surveyed 21 EWA providers last year. The data show that Marylanders earning between $25,000 and $50,000 a year are the most frequent users, and that Black and Hispanic communities also use the services at disproportionately high rates. Low-income users and people over age 65 are the most likely to default on money borrowed through EWA.
Between 2019 and 2024, about 345,000 Marylanders made over 11 million EWA transactions, Kat Hyland, deputy commissioner at the state Department of Labor’s Office of Financial Regulation, told lawmakers during the legislative hearing in March.
Most users have 51 or more repeat transactions, and though the average transaction was $108, some exceeded $500, the data shows.
“Many users rely on EWA repeatedly, with 16% of one provider’s users cashing out six or more times in a two-week period, showing a cycle of financial strain,” Hyland said.
The average interest rate was 101%, higher than most payday loans, she said.
But House Economic Matters Chair C.T. Wilson, the bill’s lead sponsor, said it’s misleading to equate a $5 fee on a small cash advance with the interest rate on a typical loan.
He emphasized that there is a clear need for the service.
“We are there to protect people, but we cannot be their parents,” Wilson said. “And I do want them to pay their rent or pay their mortgage or pay their car insurance, so they can continue on existing until they figure it out.”
The law is set to take effect Oct. 1.
