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National Summary
Employers may consider advancing money to employees facing serious financial hardship or as financial incentives. However, employers must carefully consider the complications the lender-borrower relationship will add to the employer-employee relationship. Employers that regularly make loans or advances to employees may be subject to the disclosure requirements of consumer credit laws. If an employee is required to repay a loan through payroll deductions, employers must comply with state laws related to such deductions. Before making advances or loans to employees, employers should have a written policy that clearly states who is eligible for a loan and under what circumstances. However, when an employee is having serious financial and personal difficulties, the best course of action is often to refer the employee to an Employee Assistance Program or a consumer credit counseling organization.
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