Bill Text: AZ SB1273 | 2024 | Fifty-sixth Legislature 2nd Regular | Introduced
Bill Title: Earned wage access; providers; license
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2024-01-31 - Senate read second time [SB1273 Detail]
Download: Arizona-2024-SB1273-Introduced.html
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REFERENCE TITLE: earned wage access; providers; license |
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State of Arizona Senate Fifty-sixth Legislature Second Regular Session 2024
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SB 1273 |
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Introduced by Senator Mesnard
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An Act
amending sections 6-101, 6-602 and 6-1202, Arizona Revised Statutes; amending title 6, Arizona Revised Statutes, by adding chapter 18; relating to banks and financial institutions.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 6-101, Arizona Revised Statutes, is amended to read:
6-101. Definitions
In this title, unless the context otherwise requires:
1. "Automated teller machine" means an automated device that is established by a bank, savings and loan association or credit union and that facilitates customer-bank communications activities, including taking deposits and disbursing cash drawn against a customer's deposit account or a customer's preapproved loan account, at a location separate from the home office or a branch.
2. "Bank" means a corporation that holds a banking permit issued pursuant to chapter 2 of this title.
3. "Banking office":
(a) Means any place of business of the bank at which deposits are received, checks are paid or money is loaned. but
(b) Does not include the premises used for computer operations, proofing, record keeping recordkeeping, accounting, storage, maintenance or other administrative or service functions.
4. "Branch" means any banking office other than the principal banking office.
5. "Department" means the department of insurance and financial institutions.
6. "Deputy director" means the deputy director of the financial institutions division of the department.
7. "Director" has the same meaning prescribed in section 20-102.
8. "Division" means the financial institutions division within the department.
9. "Enterprise" means any person under the jurisdiction of the department other than a financial institution.
10. "Federal deposit insurance corporation" includes any successor to the corporation or other agency or instrumentality of the United States that undertakes to discharge the purposes of the corporation.
11. "Financial institution" means banks, trust companies, savings and loan associations, earned wage access providers as prescribed in chapter 18 of this title, credit unions, consumer lenders, international banking facilities and financial institution holding companies under the jurisdiction of the department.
12. "Home state" means the state that has granted the bank its charter, permit or license to operate.
13. "Host state" means the state in which a financial institution is doing business and not the state that has granted the bank its charter, permit or license to operate.
14. "In-state financial institution" means a state or federal bank, savings bank, savings and loan association or holding company with its home office located in this state.
15. "International banking facility" means a facility that is represented by a set of asset and liability accounts segregated on the books and records of a commercial bank, the principal office of which is located in this state, and that is incorporated and doing business under the laws of the United States or of this state, a United States branch or agency of a foreign bank, an edge corporation organized under section 25(a) of the federal reserve act (12 United States Code sections 611 through 631) or an agreement corporation having an agreement or undertaking with the board of governors of the federal reserve system under section 25 of the federal reserve act (12 United States Code sections 601 through 604(a)) that includes only international banking facility time deposits and international banking facility extensions of credit as defined in 12 Code of Federal Regulations part 204.
16. "National credit union administration" includes any successor to the organization or other agency or instrumentality of the United States that undertakes to discharge the purposes of the organization.
17. "Out-of-state bank" means a bank, savings bank or savings and loan association that is approved by the deputy director pursuant to section 6-322 and that has a charter, a permit or any other license to operate that is issued by a state other than this state.
18. "Out-of-state financial institution" means a state or federal bank, savings bank, savings and loan association, earned wage access provider as prescribed in chapter 18 of this title or holding company with its home office in a state other than this state.
19. "Title" includes this title, title 32, chapters 9 and 36 and title 44, chapter 2.1.
Sec. 2. Section 6-602, Arizona Revised Statutes, is amended to read:
6-602. Exemptions
A. This chapter does not apply to:
1. A person who does business under any other law of this state, or any other state while regulated by a state agency of that other state, or of the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or receiverships if the consumer lender loan transactions are regulated by the other law or are under the jurisdiction of a court.
2. A person who is licensed as a pawnbroker pursuant to title 44, chapter 11, article 3 to the extent that the person's activities are governed by that article.
3. A person who is not regularly engaged in the business of making consumer lender loans.
4. A person who is licensed pursuant to chapter 9 of this title to the extent that the person's activities are governed by that chapter.
5. A person who is licensed as a earned wage access provider pursuant to chapter 18 of this title.
B. The requirements of this chapter do not apply to:
1. Closed end loans of more than $10,000.
2. Advances on open end revolving loans that are not secured by the consumer's principal residence with an agreed on credit limit of more than $10,000, regardless of the amount of any advances on these revolving loans.
3. Advances on open end revolving loans that are secured by the consumer's principal residence with an agreed on credit limit of more than $10,000, regardless of the amount of any advances on these revolving loans.
4. Consumer lender loans that are lawfully made to nonresidents of the state in any other state under and in accordance with a regulatory consumer lender law similar in principle to this chapter.
5. Educational loans that are either:
(a) Made, insured or guaranteed pursuant to a program authorized by the United States, this state or any other state.
(b) Made by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code to students who attend postsecondary educational institutions in this state.
6. Earned wage access transactions and related payments regulated pursuant to chapter 18 of this title.
C. A consumer loan made pursuant to a consumer lender license is not a secondary motor vehicle finance transaction as defined in section 44-281.
Sec. 3. Section 6-1202, Arizona Revised Statutes, is amended to read:
6-1202. Exemptions
A. This article does not apply to any of the following:
1. An operator of a payment system that provides processing, clearing or settlement services between or among persons exempted by this section or licensees in connection with wire transfers, credit card transactions, debit card transactions, stored value transactions, automated clearinghouse transfers, earned wage access transactions regulated pursuant to chapter 18 of this title or similar transfers of money.
2. A person appointed as an agent of a payee to collect and process a payment from a payor to the payee for goods or services, other than money transmission, provided to the payor by the payee, if all of the following apply:
(a) A written agreement exists between the payee and the agent directing the agent to collect and process payments from payors on the payee's behalf.
(b) The payee holds the agent out to the public as accepting payments for goods or services on the payee's behalf.
(c) Payment for the goods and services is treated as received by the payee on receipt by the agent so that the payor's obligation is extinguished and there is no risk of loss to the payor if the agent fails to remit the money to the payee.
3. A person that acts as an intermediary by processing payments between an entity that has directly incurred an outstanding money transmission obligation to a sender and the sender's designated recipient, if the entity meets all of the following criteria:
(a) Is properly licensed or exempt from the licensing requirements under this article.
(b) Provides a receipt, electronic record or other written confirmation to the sender identifying the entity as the provider of money transmission in the transaction.
(c) Bears sole responsibility to satisfy the outstanding money transmission obligation to the sender, including the obligation to make the sender whole in connection with any failure to transmit the money to the sender's designated recipient.
4. The United States or a department, an agency or an instrumentality of the United States or its agent.
5. Money transmission by the United States postal service or by an agent of the United States postal service.
6. A state, county, city or town or any other governmental agency or governmental subdivision or instrumentality of a state or its agent.
7. A federally insured depository financial institution, a bank holding company, an office of an international banking corporation, A foreign bank that establishes a federal branch pursuant to 12 United States Code section 3102, a corporation organized as a bank service company pursuant to 12 United States Code sections 1861 through 1867 or a corporation organized pursuant to 12 United States Code sections 611 through 633.
8. An electronic funds transfer of governmental benefits for a federal, state, county or governmental agency by a contractor on behalf of the United States or a department, agency or instrumentality of the United States or on behalf of a state or governmental subdivision, agency or instrumentality of a state.
9. A board of trade designated as a contract market under the commodity exchange act (7 United States Code sections 1 through 26 27f) or a person that, in the ordinary course of business, provides clearance and settlement services for a board of trade to the extent of its operation as or for the board of trade.
10. A registered futures commission merchant under the federal commodities laws to the extent of its operation as a merchant.
11. A person registered as a securities broker or dealer under federal or state securities laws to the extent of the person's operation.
12. An individual employed by a licensee, an authorized delegate or any person exempt from the licensing requirements of this article when acting within the scope of employment and under the supervision of the licensee, authorized delegate or exempt person as an employee and not as an independent contractor.
13. A person expressly appointed as a third-party service provider to or agent of an entity exempt under paragraph 7 of this subsection solely to the extent that both:
(a) The service provider or agent is engaging in money transmission on behalf of and pursuant to a written agreement with the exempt entity that sets forth the specific functions that the service provider or agent is to perform.
(b) The exempt entity assumes all risk of loss and all legal responsibility for satisfying the outstanding money transmission obligations owed to purchasers and holders of the outstanding money transmission obligations on receipt of the purchaser's or holder's money or monetary value by the service provider or agent.
14. A person exempt by regulation or order if the director finds such exemption to be in the public interest and that regulating the person is not necessary for the purposes of this article.
B. The director may require that any person claiming to be exempt from licensing pursuant to this section provide information and documentation to the director demonstrating that the person qualifies for any claimed exemption.
Sec. 4. Title 6, Arizona Revised Statutes, is amended by adding chapter 18, to read:
CHAPTER 18
EARNED WAGE ACCESS
ARTICLE 1. GENERAL PROVISIONS
6-1801. Definitions
In this chapter, unless the context otherwise requires:
1. "business entity" means any corporation, limited liability company, partnership, association or other commercial entity.
2. "consumer" means an individual who resides in this state.
3. "consumer-directed wage access service" means delivering to consumers access to earned but unpaid income that is based on the consumer's representations and the provider's reasonable determination of the consumer's earned but unpaid income.
4. "earned but unpaid income" means salary, wages, compensation or other income that a consumer or an employer has represented and that a provider has reasonably determined has been earned or accrued to the benefit of the consumer in exchange for the consumer's services to the employer or on behalf of the employer, includING:
(a) On an hourly, project-based, piecework or other basis.
(b) Circumstances in which the consumer is acting as an independent contractor of the employer, but has not, at the time of the payment of proceeds, been paid to the consumer by the employer.
5. "earned wage access service" means providing consumer-directed wage access services or employer-integrated wage access services, or both.
6. "employer":
(a) means a person that employs a consumer or any other person that is contractually obligated to pay a consumer earned but unpaid income in exchange for the consumer's provision of services to the employer or on behalf of the employer, including:
(i) On an hourly, project-based, piecework or other basis.
(ii) Circumstances in which the consumer is acting as an independent contractor with respect to the employer.
(b) does not include:
(i) a customer of an employer.
(ii) any other person whose obligation to make a payment of salary, wages, compensation or other income to a consumer is not based on the provision of services by that consumer for or on behalf of the person.
7. "employer-integrated wage access services" means delivering to consumers access to earned but unpaid income that is based on employment, income or attendance data obtained directly or indirectly from an employer.
8. "fee":
(a) means a fee imposed by a provider for delivery or expedited delivery of proceeds to a consumer or a subscription or membership fee imposed by a provider for a bona fide group of services that includes earned wage access services.
(b) does not include:
(i) voluntary tips.
(ii) gratuity.
(iii) other donations.
9. "licensee" means a business entity that is licensed by the division under section 6-1802 as a provider.
10. "nationwide mortgage licensing system and registry" means a MORTGAGE licensing system DEVELOPED and maintained by a conference of state bank supervisors and an American association of residential mortgage regulations for the state licensing and registration of licensed loan originators and REGISTERED loan originators or such a system established by the United states director of the bureau of consumer financial protection.
11. "proceeds" means a payment in United States dollars to a consumer by a provider that is based on earned but unpaid income.
12. "provider":
(a) means a business entity that provides earned wage access services to consumers.
(b) does not include:
(i) a service provider, such as a payroll service provider, whose role may include verifying the available earnings but that is not contractually obligated to fund proceeds delivered as part of an earned wage access service.
(ii) an employer that offers a portion of salary, wages or compensation directly to its employees or independent contractors before the normally scheduled pay date.
6-1802. License; application; fees; bond confidentiality; definitions
A. A provider, whether located in this state or in another state, may not provide earned wage access services in this state unless the provider has been issued a license by the division.
B. A provider required to be licensed under this section shall apply for a license on a form an in a manner as prescribed by the division. The application shall include all of the following information:
1. The name of the provider.
2. The name under which the provider transacts business, if different from paragraph 1 of this subsection.
3. The address of the provider's principal office, which may be outside of this state.
4. The addresses of all of the provider's offices or retail stores, if any, located in this state.
5. If the provider provides earned wage access services at a location that is not an office or retail store in this state, a brief description of the manner in which the provider provides earned wage access services.
6. The address of the provider's designated agent on whom service of process may be made in this state.
7. The provider's federal employer identification number.
8. Any other similar information the division requires to administer this chapter.
C. In addition to the application under subsection b of this section, each licensee shall register with and maintain a valid unique identifier issued by the nationwide mortgage licensing system and registry.
D. Each provider required to be licensed under this section shall update any information provided in its license application within fifteen business days after any material change in that information.
E. A provider that submits an application for a license under this section shall pay an application fee in an amount to be DETERMINED by the deputy director.
F. A provider required to be licensed under this section shall file with the division and maintain in force a surety bond that is issued by a surety company admitted to do business in this state and that meets all of the following requirements:
1. Is in an amount equal to $25,000.
2. Is in favor of this state for the benefit of any person that is damaged by a violation of this chapter.
3. Is in favor of any person that is damaged by a violation of this chapter.
G. A person that claims against a bond described under subsection F of this section for a violation of this chapter may maintain an action at law against the provider that obtained the surety that issued the bond. The surety is liable only for actual damages and not for punitive damages. The aggregate liability of the surety to all persons damaged by a provider's violation of this chapter does not exceed the amount of the bond.
H. Once the applicant submits an application and remits payment of the application fee, the division shall conduct a character and general fitness and financial responsibility investigation of the following:
1. The Applicant.
2. The applicant's partners if the provider is a partnership.
3. The applicant's members if the provider is a limited liability company or association.
4. The applicant's officers and directors if the provider is a corporation.
I. If the investigation pursuant to SUBSECTION H of this section finds relevant facts that warrant the belief that the Applicant's business will be operated in COMPLIANCE with this chapter, the division shall issue a license, and if not, the division shall deny the application for a license.
J. The division may not issue a license to an applicant if any of the following applies:
1. The applicant fails to provide any information required under subsection b of this section.
2. The department of revenue certifies that the applicant is liable for delinquent taxes as prescribed in section 42-1103.
K. the provider's license remains in force and effect until the Division suspends or revokes the license in accordance with this chapter or the provider surrenders the license. On or before December 10 of each year, A licensee shall pay a renewal fee established by the division for the next succeeding calendar year. The division may establish rules that provide for the reinstatement of expired licenses that are consistent with the standards established by the nationwide mortgage licensing system and registry.
L. A provider may not assign a license unless it is approved by the division or by operation of law in connection with a merger or conversion.
M. A provider shall conspicuously post its license at the physical place of business or on the provider's website, if the provider conducts business on a website.
N. The division shall keep confidential the information contained in an application for a license under subsection b of this section and any information obtained during the division's character and general fitness and financial RESPONSIBILITY investigation under subsection H of this section, and thAT information is not subject to public copying or public inspection under section 39-121.
O. For the purposes of this section:
1. "applicant" means a provider that has submitted an application for a license under subsection b of this section.
2. "director" means a member of the applicant's or licensee's board of directors.
3. "Member", except under paragraph 2 of this subsection, means a person who either:
(a) has the right to receive on dissolution.
(b) has contributed ten percent or more of the capital contribution of an applicant or licensee that is organized as a limited liability company or association.
4. "officer":
(a) Means a person who participates or has authority to participate, other than in the capacity of a director, in major policymaking functions of an applicant or licensee, whether or not the person has an official title.
(b) Includes the chief executive officer, chief financial officer, chief operations officer, chief legal officer, chief credit officer and chief compliance officer, each executive vice president or senior vice president and any other person meeting the standard under this paragraph.
5. "partner" means a person that either:
(a) has the right to receive on dissolution.
(b) has contributed ten percent or more of the capital contribution of an applicant or licensee that is organized as a partnership.
6-1803. Provider requirements; limitations
A. A provider required to be licensed under section 6-1802 shall do all of the following:
1. Develop and implement policies and procedures to respond to questions raised by consumers and address complaints from consumers in an expedient manner.
2. Offer at least one reasonable option to a consumer about how to obtain proceeds at no cost and clearly explain how to elect that no cost option.
3. Before entering into an agreement with a consumer for earned wage access services, do all of the following:
(a) inform the consumer of the consumer's rights under the agreement.
(b) fully and clearly disclose all fees associated with the earned wage access services.
4. Inform the consumer of any material change to the terms and conditions of the earned wage access services before implementing that change to the consumer.
5. Allow the consumer to cancel use of the provider's earned wage access services at any time without incurring a cancellation fee or penalty.
6. Comply with all local, state and federal privacy and information security laws.
7. If a provider solicits, charges, or receives a tip, gratuity or other donation from a consumer, do all of the following:
(a) clearly and conspicuously disclose to the consumer immediately before each transaction that any tip, gratuity or other donation amount may be zero and is voluntary.
(b) clearly and conspicuously disclose in its service contract with the consumer and elsewhere that any tip, gratuity or donation is voluntary and that offering earned wage access services, including the amount of proceeds a consumer is eligible to request and the frequency with which proceeds are provided to a consumer, is not contingent on whether the consumer pays any tip, gratuity or other donation or on the size of the tip, gratuity or other donation.
8. Provide proceeds to a consumer by any means mutually agreed on by the consumer and the licensee.
9. If the provider seeks repayment of outstanding proceeds or payment of fees or other amounts owed, including voluntary tips, gratuities or other donations in connection with the activities covered by this chapter from a consumer's account at a depository institution by means of an electronic funds transfer, do all of the following:
(a) comply with applicable provisions of the federal electronic fund transfer act as prescribed in 15 United States Code section 1693 and section 1693r and the regulations adopted under 15 United States Code section 1693 and section 1693r.
(b) reimburse the consumer for the full amount of any overdraft or non-sufficient fund fees imposed on a consumer by a consumer's depository institution that were caused by the provider attempting to seek payment of any outstanding proceeds, fees or other payments in connection with the activities covered by this chapter, including voluntary tips, gratuities or other donations on a date before, or in an incorrect amount from, the date or amount disclosed to the consumer. The provider is not subject to the requirements in this subsection with respect to payments of outstanding amounts or fees incurred by a consumer through fraudulent or other unlawful means.
B. A provider thAt is required to be licensed under section 6-1802 may not do any of the following:
1. Share with an employer a portion of any fees, voluntary tips, gratuities or other donations that were received from or charged to a consumer for earned wage access services.
2. Require a consumer's credit report or a credit score provided or issued by a consumer reporting agency to determine a consumer's eligibility for earned wage access services.
3. Accept payment of outstanding proceeds, fees, voluntary tips, gratuities or other donations from a consumer by means of a credit card or charge card.
4. Charge a late fee or deferral fee, interest or any other penalty or charge for failure to pay outstanding proceeds, fees, voluntary tips, gratuities or other donations.
5. Report to a consumer reporting agency or debt collector any information about the consumer regarding the inability of the provider to be repaid outstanding proceeds, fees, voluntary tips, gratuities or other donations.
6. Compel or attempt to compel payment by a consumer of outstanding proceeds, fees, voluntary tips, gratuities or other donations to the provider through any of the following means:
(a) a suit against the consumer in a court of competent jurisdiction.
(b) use of a third party to pursue collection from the consumer on the provider's behalf.
(c) sale of outstanding amounts to a third-party collector or debt buyer for collection from the consumer.
8. Advertise, print, display, publish, distribute or broadcast or cause to be advertised, printed, displayed, published, distributed or broadcast, in any manner, any statement or representation with regard to the earned wage access services that are offered by the provider that is false, misleading or deceptive, or that omits or states material information that is necessary to make the statements not false, misleading or deceptive.
1. seeking payment of any outstanding amount or fee that was incurred by a consumer through fraud or other unlawful means.
2. Suing an employer for breach of the employer's contract to the provider.
D. A provider may use the mailing address provided by a consumer to determine the consumer's state of residence for the purposes of this chapter.
6-1804. Interpretation; applicability
A. Notwithstanding any other law, earned wage access services offered and provided by a licensee in compliance with this chapter are not considered any of the following:
1. A violation of or noncompliance with section 23-1068, subsection a or any other law of this state governing a sale, assignment or order for earned but unpaid leave.
2. A loan or other form of credit or debt, and the provider is not considered a creditor, debt collector or lender.
3. Money transmission, and the provider is not considered a money transmitter.
B. Notwithstanding any other law, fees paid to a licensee in accordance with this chapter are not considered interest or finance charges. If there is a conflict between this chapter and any other statute, this chapter controls.
C. Title 32, chapter 9 does not apply to proceeds a provider provides to a consumer in accordance with this chapter.
D. A voluntary tip, gratuity, or other donation paid by a consumer to a licensee in accordance with this chapter are not considered a finance charge.
6-1805. Annual report; books and records
A. On or before july 1 of each year, a provider that is required to be licensed under section 6-1802 shall submit an annual report to the division that includes all of the following information related to earned wage access services that the provider provided in this state during the prior year:
1. Gross revenue that is attributed to earned wage access services.
2. The total number of transactions in which the provider provided proceeds to consumers.
3. The total number of unique consumers to whom the provider provided proceeds.
4. The total dollar amount of proceeds the provider provided to consumers.
5. The total dollar amount of fees, voluntary tips, gratuities or other donations the provider received from consumers.
B. The division may take disciplinary action against a provider if the provider fails to submit a timely report as required under this section.
C. The division shall keep confidential the information contained in the annual report under subsection a of this section, and that information is not subject to public copying or public inspection under section 39-121. The division may prepare and make publicly available an aggregated and anonymized analysis of the information submitted by all providers under this section.
D. A provider required to be licensed under section 6-1802 shall keep such books and records that, in the opinion of the division, will enable the division to determine whether the provider is in compliance with this chapter.
6-1806. Suspension or revocation of license
A. The division may suspend or revoke a provider's license that is issued under this chapter if the division finds any of the following:
1. the provider violated this chapter, any rule adopted under this chapter or any lawful order of the division made under this chapter.
2. The division discovered a fact or condition that would have been grounds to deny the application if the fact or condition had existed at the time the provider submitted an original application.
3. The provider made a material misstatement in an application or in the information provided to the division.
4. The provider failed to pay the annual license fee or to maintain in effect the surety bond required under section 6-1802, subsection g.
B. The division shall revoke a provider's license if the department of revenue certifies under section 42-1103 that the provider is liable for delinquent taxes.
C. Except as provided in subsection b of this section, the division may not revoke or suspend a provider's license except after a hearing pursuant to section 6-1807.
6-1807. Violations; civil action; temporary restraining order; hearing; enforcement; civil penalty
A. The division may bring a civil action to restrain by temporary or permanent injunction a person from violating this chapter or rules adopted under this chapter or to restrain a person from engaging in false, misleading, deceptive or unconscionable conduct in connection with offering earned wage access services.
B. The division may seek a temporary restraining order without written or oral notice to the adverse party. If a court finds that there is reasonable cause to believe that the respondent is engaged in the conduct sought to be restrained and that such conduct violates this chapter or rules adopted under this chapter, the court may grant a temporary restraining order or any temporary relief the court determines is appropriate. A temporary restraining order granted without notice shall expire by its terms within a stated time after entry, not to exceed thirty days, unless within this time it is extended by the court or the party against whom the order is directed consents that it may be extended for a longer period. When a temporary restraining order is granted without notice, the motion for a preliminary injunction shall be set for a hearing at the earliest possible time. On notice to the party who obtained the temporary restraining order without notice, the adverse party may appear and move for dissolution or modification of the temporary restraining order, and the court shall proceed to hear and determine such motion as expeditiously as the ends of justice require.
C. The division may recover in a civil action from a person that violates this chapter or rules adopted under this chapter a civil penalty of not less than $100 and not more than $1,000 for each violation.
D. In addition to the amount to which the division is entitled under subsection c of this section, the division may recover in a civil action from a person that knowingly or wilfully violates this chapter or rules adopted under this chapter a civil penalty of not less than $1,000 and not more than $10,000 for each violation.
