An option when the salary arrives too late

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The past few months have been difficult for New Yorkers. The omicron surge has ravaged the state, supply chain issues have contributed to grocery store shelves going empty, and many residents are finding it increasingly difficult to get and stay ahead of their bills. Inflation is at its highest level in 40 years and gasoline prices are skyrocketing.

As these issues compound each other, families struggle to make ends meet. That’s why it’s more important than ever to provide access to cash and champion financial empowerment. As the cost of daily necessities continues to rise, thousands of Americans wonder how they will continue to pay their bills on time.

What should hard workers do when they need a few extra bucks to fill up their tank and they’ve made some money, but they’re trapped because they haven’t been paid for weeks? Every year, while Americans wait for their paychecks, more than $1 trillion of their hard-earned money gets stuck. As a result, consumers most in need of cash are racking up over $50 billion in late and overdraft fees and many are turning to high-interest loans, which can become a never-ending cycle.

One option is to turn to new and innovative financial technology that can help improve consumers’ quality of life. A relatively new concept, Earned Wage Access (EWA), allows working families to be paid on their own schedule, helping them manage their cash flow without the negative impacts of high interest loans and high fees. . There are a number of companies offering people access to their pay as they earn it, without the interest and late fees charged by many financial service providers. EWA companies have no legal recourse against consumers. So if life happens and a consumer is unable to repay the company, there are no late fees and their credit scores are unaffected for years.

A research study conducted in May 2021 with FTI Consulting found that EWA helps working families stuck in a traditional payroll cycle manage their finances. The study found that without EWA, 44% of users would otherwise consider not paying certain bills and more than a third of consumers would deliberately overdraw or use a payday loan due to cash flow constraints. Additionally, 92% of consumers who received the EWA said it helped them pay their bills on time, avoid overdraft fees, and become less reliant on credit cards, allowing them easier access to financial freedom.

However, as EWA is currently unregulated in New York, there can be no assurance that responsible EWA providers will be allowed to continue to provide financial assistance to vulnerable residents who need access to their wages to get by. go out. It is our obligation to ensure that these tools are available to New York consumers, but it is also our responsibility to ensure that these providers follow clear rules and that consumers do not have to sacrifice their privacy. or to be otherwise exploited in order to obtain their hard-earned money. Other financial products with a high APR, hidden contractual obligations, or that make money off the back of the consumer, rather than helping the consumer, should not find a backdoor through EWA.

The legislation I have introduced will draw a line between predatory practices and trustworthy EWA services that provide value to consumers who have been excluded by the traditional compensation cycle. It has been consistently shown that financially vulnerable users are better off when they have access to the money they have already earned through EWA. We must support new tech legislation that strengthens consumer protection laws and ensures bad actors are kept out while helping Americans achieve financial independence.

State Sen. Jeremy Cooney, D-Rochester, represents the 56th Senate District.

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