Twice in the past year, Democratic lawmakers have debated legislation that revolves around a fundamental question: If a finance company gives you an immediate advance on your paycheck in exchange for repayment and a flat fee, is that a loan?
If the answer is yes, as some lawmakers and consumer advocates contend, then that would mean the burgeoning “earned-wage access” industry has been running afoul of a law passed by Colorado voters to crack down on payday lenders.
The companies offer pre-payday advances to workers. But the typical $3.50 fee charged for a $50 advance translates to an annual interest rate of 365% — which would be 10 times the limit .
“We see earned-wage access as a credit product (in which) folks can take out credit against their future earnings, that they will repay back to a company,” said Andrea Kuwik, the director of policy and research for the progressive Bell Policy Center. ” … We think there are remarkable similarities to payday loans.”
But the companies — and some Colorado lawmakers — contend that their advances are no such thing.
The companies charge flat fees, they don’t sue customers or send them to debt collectors, and there’s no risk to someone’s credit score. Under that argument, earned-wage access, or EWA, services in Colorado exist in some largely unregulated gray area.
“We don’t fit easily in that bucket. We have some parts of money transmission, some parts of lending … but it doesn’t fit easily into any one of those buckets,” Ben LaRocco, the government affairs director for , one of the EWA providers, told lawmakers in February.
The industry has argued that it provides workers access to money they’ve already earned but haven’t been paid yet — hence the name “earned-wage access.”
Enter . Backed by the EWA industry and a pair of Democratic lawmakers, the measure would definitively define these advances as not-loans. It would require companies offering the service to become licensed with the state, and the bill would cap fees at $5 for advances of less than $75 and $7 for anything more than that.
The measure would also require companies to prominently offer customers a free option (which provides money a few days later), and it would prohibit the apps from asking customers for tips, as is standard within the industry.
Amid opposition from progressive lawmakers and consumer protection groups, the bill narrowly passed a committee vote in February and is awaiting a second hearing, likely in April.
Sponsors say it’s a vital service
The bill’s legislative backers, Democratic Majority Leader Monica Duran and Rep. Sean Camacho, said the products provide a vital service for cash-strapped workers. The advances are typically small and the fees charged are even smaller, they argue, and the service is preferable to workers amassing credit card debt or delayed bills.
In an interview, Duran said the services have been used in Colorado for years with no guardrails.
“At the end of the day, if somebody needs to access their money — not take out a loan, not apply for a loan — but if they want to access their money for groceries, copays, maybe they need to buy diapers or formula, they should have the ability to do that,” the Wheat Ridge Democrat said.
But the measure’s opponents contend that the products are little more than a modern spin on payday lending and should be regulated as such.
The New York attorney general from one provider, DailyPay, was $20 for a $2.99 fee. That amounted to annual interest topping 750%. While the companies claim that customers don’t have to pay them back so long as they don’t intend to use the service again, lawsuits and federal judges have noted that the companies are often hooked into a person’s bank account and can directly withdraw the amount they’re owed.
Federal regulators, consumers and two attorneys general have filed lawsuits against the companies elsewhere in the U.S., accusing them of violating state and federal laws on credit and loans. Federal judges in California and Illinois have repeatedly rejected the companies’ claims that their products aren’t loans, upholding lawsuits challenging the companies’ practices.
In the midst of those court challenges, the Colorado legislation is part of a national push by the earned-wage access industry to set its own guardrails: Similar bills have been introduced or passed in several other states, and a previous attempt in Colorado died in the legislature last year amid the same sort of opposition that’s greeted the 2026 version.
While several states have passed or considered bills similar to HB-1046, regulators in Connecticut and California have both classified the products as loans, , a trade publication.
“They’re the definition of loans, and because of that, (the industry is) scrambling,” said Rep. Yara Zokaie, a Fort Collins Democrat who has led opposition to the proposal over the last two legislative sessions. “Because they want to continue having predatory practices. They want to continue having fees.”
Colorado Attorney General Phil Weiser’s office has declined to provide clarity. A spokesman couldn’t say whether the attorney general could use Colorado’s voter-approved payday loan rules to target earned-wage access companies. Two officials from Weiser’s office — who testified in front of lawmakers in February — declined to say whether Weiser’s office had ever investigated one of the companies.
But Martha Fulford, an assistant deputy attorney general, did tell lawmakers that Weiser wanted to regulate some companies — those that market themselves directly to customers — under the state’s current rules. She said she saw potential ways to regulate the other type of earned-wage access, in which the companies partner with employers, albeit “with protections.”
Unusual funding mechanism
The bill has been mutated by the legislature’s $1.5 billion budget hole and Colorado’s binding fiscal policies. Because the bill would cost money to implement — money that the legislature doesn’t have — Duran and Camacho are proposing that the state pay for the regulations using money donated or given to it.
That could include donations from the very companies that are backing the bill — and that would also be regulated beneath its provisions.
Jefferey Riester, the lobbyist for Weiser’s office, told lawmakers that if they wanted to pursue that plan, the AG would want to ask if “that (is) an appropriate way to fund regulatory behaviors.”
Duran acknowledged the raised eyebrows the bill’s funding mechanism had drawn. She said she was now trying to figure out how to pass some version of the policy that wouldn’t cost any money and wouldn’t be reliant on either vanishing state dollars or donations from private groups.
“What valuable step can we take right now and be mindful of our budget and build upon it?” she said.
The bill next needs a hearing in the House Appropriations Committee, which will likely come in mid-April at the earliest.
