EWA fintech EarnIn evokes the Constitution in fight over tips

A major legal battle in Maryland could change how you offer Earned Wage Access (EWA) to your employees. The fintech company EarnIn is suing the state of Maryland over a law that bans EWA providers from asking for 'tips.' Maryland regulators recently classified EWA services as loans. This means providers must follow state usury laws and interest rate caps. Because many EWA providers rely on voluntary tips rather than traditional interest, these new rules make their current business models nearly impossible in the state. EarnIn argues that the ban on asking for tips violates their First Amendment right to free speech. They claim that simply asking a user for a tip is not the same as charging mandatory interest. For business owners, this case is a bellwether for the entire 'liquidity-on-demand' industry. If Maryland wins, EWA providers may pull out of specific states or be forced to switch to subscription-based models. If EarnIn wins, it could protect the 'tipping' model from being regulated as a traditional loan product. Keep a close watch on this if you use EWA as a recruitment or retention tool for your staff. The outcome will determine if these services remain low-cost or become regulated like payday lenders.

Source: American Banker — Top News

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