In California and especially in Los Angeles, we know how to work hard and we’re not afraid of something new. As the Department of Financial Protection and Innovation moves forward with a rule governing Earned Wage Access, it is worth remembering these traditions. Right now, regulators are advancing an EWA proposal that prioritizes old ideology over innovation and worker interests. That’s not the California way.
EWA is another term for on-demand pay. It is a service that disrupts the traditional pay period.
EWA products allow workers to access their income as they earn it. With EWA, workers who need to pay bills and other expenses do not have to wait two or more weeks for their paycheck. In exchange for no fee or a low, ATM-like fee, workers can have their accrued wages deposited early.
Employers like me are increasingly offering EWA services to our employees. We offer on-demand pay as a way to attract and retain employees and to help our workers take more control over their financial lives.
In Los Angeles County in 2023, nearly 400 employers offered EWA through the same platform I use. Hundreds of other employers used different providers, including Rain Technologies Inc., based right here in Venice.
Research shows that workers like on-demand pay and believe EWA helps reduce their financial stress. Just as important, surveys show that EWA gives workers on a tight budget a low cost alternative to payday loans and excessive bank fees.
‘Winning an academic debate’
EWA is precisely the kind of safe, worker-friendly product California should support. Unfortunately, that is not happening because regulators at DFPI seem intent on winning an academic debate, even if it will hurt Los Angeles area workers and businesses.
For more than a year, the state has been moving forward with a regulation that would classify EWA products as loans. This classification has been rejected by nearly every other state because treating EWA as a loan is bad for both workers and businesses.
On-demand pay is appealing to workers and business owners like me precisely because it is not a lending product. Workers choose to use EWA because it comes without the threat of late fees, interest payments, or debt collection. Nearly everyone with a paycheck qualifies. For employers who run a payroll like me, it is a great way to help workers.
By treating EWA as a loan, the current proposal would make EWA more expensive for workers and more difficult for employers to offer. Worse, a loan classification would cut off many workers’ early access to their pay, sending them right back to payday lenders, banks overdrafts, and others who charge excessive interest and high fees.
DFPI’s insistence on classifying EWA as a lending product stems from a philosophical belief that any money workers access before their traditional payday is a loan. This belief is not only misguided, but has led DFPI to tie itself in knots writing a confusing regulation that makes things more complicated for people like me in the real world.
Fortunately, there is a better way.
The “I” in DFPI stands for innovation, and it is time for DFPI to stop clinging to dogmatic beliefs and instead do what is best for California workers and employers. That means offering a pathway for EWA to continue to operate in California outside the state’s lending laws. There are ways to put meaningful guardrails around the product without fundamentally altering access. This is especially true for employer-integrated EWA services like my business offers and that L.A.-based Rain provides. Even consumer advocates agree a separate “regulatory regime” may be appropriate for the employer-sponsored model in a state like ours that still has payday loans.
California has always been at the forefront of creating regulations that protect consumers and allow innovative products to flourish responsibly. To date, DFPI’s proposed EWA regulations ignore this tradition, but there is still time to fix the rule. If DFPI is unwilling to put aside its rigid views, Gov. Gavin Newsom and Los Angeles-area legislators should work together to protect on-demand pay in California.
Dean Kirk has managed Hilton Brand hotels for the last 17 years and is currently in the process of opening his fourth Hilton Brand hotel, a 100-room Hampton Inn & Suites in Porter Ranch set to open later this year. Prior to his career at Hilton, Kirk worked in high-end food and beverage management for over two decades. He also serves on the boards of the LAPD Devonshire PALS, Porter Ranch Neighborhood Council and the Chatsworth/Porter Ranch Chamber of Commerce.
