More than six months ago, Connecticut’s new rules on Earned Wage Access (EWA) went into effect, implementing restrictions on the service that allows workers to access a portion of their wages early, forcing many EWA providers in the state to stop offering services in Connecticut, and causing devastating rippling effects on workers’ wellbeing.
As President of the Connecticut Retail Network, I’ve seen the rippling effects the restriction of these services has had on our member businesses and their workers. Connecticut’s small businesses and residents are still reeling from inflation which has caused folks to cut back on spending and their ability to pursue economic opportunities. For many workers, EWA provided crucial financial flexibility to manage day-to-day expenses without resorting to high-interest loans or accumulating credit card debt.
Currently, Connecticut stands alone as the only state that has imposed such stringent restrictions on EWA, denying our workers a financial tool that is available to every other employee across the country. This reality only amplifies the challenges that workers in the state face including the constantly increasing cost of living.
While the state experienced significant increases in our growth domestic product (GDP) last year, Connecticut’s GDP only increased 0.7% during the first quarter of 2024 after the restrictions went into effect — falling behind the rest of New England at 1% growth and the rest of the country at 1.4%.
Unfortunately, these harmful restrictions may soon extend beyond Connecticut’s borders. The federal Consumer Financial Protection Bureau (CFPB) recently issued an Interpretive Rule that misclassifies EWA as a loan, potentially disrupting the lives of millions of workers nationwide who depend on these services for financial stability, just as the restrictions in Connecticut have.
If implemented, this misguided policy could replicate Connecticut’s mistakes on a national scale, compounding economic uncertainty for working families already grappling with high inflation and rising costs.
Limiting financial access should not be the answer during a time when our economy’s growth is slowing. When people have access to their own hard-earned money, they spend it on essential goods and services from local businesses that further stimulate the economy. It’s a positive feedback loop where the entire community benefits.
As the state legislature prepares to return to session this month, I urge lawmakers to take meaningful steps to restore protections for EWA in Connecticut. It’s time to reassess and revise these restrictions to strike a balance between consumer protection and financial accessibility. Doing so would support our workforce, enhance economic growth, and build stability for our state.
Additionally, I join others in the industry calling on the CFPB to reconsider its classification of EWA and recognize the role this service plays in providing workers with financial flexibility and independence.
Millions of Americans, from healthcare workers to retail employees, rely on EWA to make ends meet. Denying them access to this vital tool risks pushing more people toward predatory financial products that trap them in cycles of debt.
Our workers depend on EWA. Our businesses depend on it. Our economy depends on it. It’s time for policymakers to listen.
Tim Phelan is the President of the Connecticut Retail Network.