WASHINGTON, D.C. – The Financial Technology Association (FTA) issued the following statement in response to the Consumer Financial Protection Bureau (CFPB)’s proposed interpretive rule concerning Earned Wage Access (EWA) products:
“We are deeply concerned that this proposed action by the CFPB will hurt millions of workers who rely on Earned Wage Access to tap into their already earned wages so they don’t have to depend on outdated monthly or biweekly pay periods to manage their expenses,” said Penny Lee, President and Chief Executive Officer of the Financial Technology Association. “Earned Wage Access should not be considered a loan as it is a no-cost, non-recourse product giving access to money workers have already earned, not future pay. We look forward to providing further comments in response to the proposed interpretive rule and urge the Bureau to focus on ensuring that consumers have financial choice and can access flexible solutions like EWA.”
More than two in three Americans believe the traditional pay period is outdated, according to a survey conducted by OnePoll on behalf of the Financial Technology Association. EWA is a safe and cost-effective way for workers to access their earned wages to meet routine or emergency needs. EWA products always offer a no-cost option, do not charge interest or mandatory fees, and do not impact users’ credit scores. Studies show that EWA products reduce people’s reliance on high-cost credit and “generally cost less than typical costs associated with payday loans.”
The Truth in Lending Act (“TILA”) does not apply to EWA products because TILA (and its implementing regulation, Regulation Z) only covers “creditors” that issue cards or extend credit that either is (1) subject to a finance charge or (2) repayable in more than four installments. EWA products neither impose a finance charge nor are they repayable in more than four installments. They are a no-cost, non-recourse service for which the provider does not secure a legally enforceable right to repayment. Simply put, EWA services have no legal right to collect upon default and do not give rise to “consumer credit” subject to TILA.
However, FTA is encouraged to see that the Bureau has called out the challenge of short-term liquidity, noting the mismatch between typical two-week or one-month pay cycles and workers’ regular or unexpected expenses. Further, FTA is encouraged to see the CFPB recognize that EWA products are not payday loans, noting that they are “distinct” from traditional offerings.
FTA has endorsed federal legislation, H.R. 7428, the Earned Wage Access Consumer Protection Act, that appropriately defines Earned Wage Access as a non-credit product and requires consumer disclosures and protections. This federal bill aligns with actions in five states (Nevada, Missouri, Wisconsin, South Carolina, and Kansas) to enact bipartisan laws defining Earned Wage Access as a non-credit product and establishing licensing and regulatory regimes. These efforts further underscore that policymaking related to EWA confronts novel questions that should be addressed through a deliberative and democratic legislative process rather than through regulatory edict.
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The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.