2025 Regulatory State of Earned Wage Access

In 2025, the Consumer Financial Protection Bureau issued an advisory opinion clarifying how certain earned wage access (EWA) is not credit under the Truth in Lending Act and Regulation Z. The Bureau determined that employer-offered EWA settled through payroll processes is not considered credit under federal law when it meets specific structural criteria. This federal clarity helps employers better understand the regulatory treatment of EWA, while state wage, labor, and lending laws continue to apply.

Is EWA a loan? 

Is earned wage access subject to state or federal lending laws? Over the last three years, several regulators and legislatures have begun to provide clarity at the state level:

• California, Connecticut, and Maryland passed laws and regulations treating EWA as credit in their states.¹ Together, these states represent 15% of the U.S. population.

• Nine other states have passed laws specifically stating that EWA is not subject to state lending laws.² Collectively, these states represent 12% of the U.S. population.

• That leaves 38 states, representing 73% of the U.S. population, that have yet to pass laws or regulations addressing this question at the state level.

States That Currently Regulate Earned Wage Access 

The CFPB issued an advisory opinion clarifying when EWA does not constitute credit under federal Truth in Lending rules—specifically when it is (i) free or (ii) employer-offered, aligned with payroll processes, limited to earned wages, and does not require employee repayment or create a debt obligation. 

Industry leaders are responding to a rapidly changing landscape. While many EWA providers do not offer EWA structured as a loan under Regulation Z, this may be shifting.

Several states have recently enacted laws regulating EWA services, some regulating EWA as non credit, like Arkansas and Utah, while others regulate EWA under their existing lending frameworks, like Maryland and Connecticut. These developments show the ongoing evolution of state approaches to EWA beyond federal guidance. 

What employers should consider now

• Confirm whether your EWA model is employer-offered and integrated with the payroll process.

• Understand how state wage deduction, assignment, and wage payment laws apply to your workforce.

• Evaluate whether provider repayment methods introduce compliance risk in key states where you employ workers.

• Align EWA with your broader financial wellness goals for your employees  and communication strategy.

Source: 

• https://mgaleg.maryland.gov/mgawebsite/Legislation/Details/hb1294?ys=2025rs
• https://portal.ct.gov/dol/knowledge-base/articles/wage-and-workplace-standards/wage-and-workplace-standards-division-notice-to-employers-utilizing-earned-wage-access-products?
• https://payroll.org/news-resources/news/news-detail/2025/04/03/arkansas-and-utah-latest-states-to-regulate-earned-wage-access-providers

EWA tax treatment: Navigating constructive receipt

In its FY 2025 Green Book, the Treasury Department has suggested that when EWA is not structured as a loan, it could be viewed as a taxable wage under the constructive receipt doctrine:

“To avoid treating employees as being in constant constructive receipt of their wages, some employers or third-party payors ignore the constructive receipt issue entirely or treat the arrangement as a loan from the employer to the employee.” ³

In other words, the green book considered how employers might avoid a taxable wage payment classification when partnered with an EWA provider or when offering EWA directly, and one way is to treat the EWA advance as a loan. How could it be a binary choice between a loan and a taxable wage? A simple explanation of how the IRS came to such a conclusion in the green book is:

1. EWA gives the user the right to receive money.

2. That money was either (i) already owned by the user or (ii) was borrowed by the user.

3. If it was borrowed, then it’s a loan.

4. If it was already owned, then it’s money that has been paid to the user by the employer.

5. And it’s been paid to the user, then it is a taxable wage payment.

Simply stated, employers can limit tax complexity by partnering with EWA providers that structure wage advances as no-cost debts.

Payroll compliance: Wage deduction and assignment risks 

When EWA providers advance money to workers, they are generally repaid in one of three ways:

1. Deduction Model, where the employer deducts the amount of the advance already taken (plus any applicable fees) from the worker’s paycheck and sends the repayment directly to the EWA provider.

2. Payroll Intercept Model, in which the employer sends the entire paycheck to the EWA provider, who repays itself for the advance already taken (plus any applicable fees) before distributing the remaining pay to the employee.

3. Settlement Model, where the employer sends the entire paycheck to the worker’s bank account as usual, then settlement occurs from the bank account at the direction of the employee.

The Payroll Deduction and Payroll Intercept Models require a change to the payroll process. They also require the employer to redirect wage payments directly to the EWA provider. These payroll repayment models could create a risk that a state may deem the model akin to a wage assignment or improper wage deduction in that state. These laws often involve gray areas. For example, some states like California have wage assignment provisions in the labor code as well as the lending code.⁴ Some states have both wage deduction and wage assignment laws that could separately be implicated.⁵ These laws can impact both the employer and the EWA provider.

The one model that can offer employers less risk is the Settlement Model, which requires no changes to payroll, no redirection of wages, and no additional compliance burden.

Three Models of Earned Wage Access Repayment: 
Payroll Deduction, Payroll Intercept, and Bank Account Settlement

EWA exposure and regulatory trends 

In April 2025, the New York Attorney General sued a large EWA provider for violations, including fees that exceeded state usury limits. The AG stated there are other similar providers who “carry on as though they are not making loans and not collecting interest because they say that they will not sue or engage in debt collection.” The AG also called out by name several large employer clients of one of the EWA defendants, stating that these employers are “covered persons” because “they broker financial products or services and provide services” to the EWA provider. In other words, employers could also face some enforcement risk. 

How should employers weigh these types of risks when considering an EWA program? Well, an employer-integrated model that can operate nationwide is one structured as no-cost debt.

Conclusion

Ten years into the evolution of earned wage access, the industry’s best practice model is now clear. To ensure maximum value and compliance, employer-integrated EWA should have two core features: