Endorses DFPI’s proposed registry and urges further study of the consumer benefits of EWA
WASHINGTON, D.C. – The Financial Technology Association (FTA), a trade association representing fintech industry leaders, today filed a comment letter in response to the California Department of Financial Protection and Innovation (DFPI)’s notice of proposed rulemaking regarding earned wage access products and providers.
Earned wage access (EWA) allows consumers to access their already earned wages, helping them smooth out cash flow between payroll cycles, which can be as infrequent as biweekly or monthly, and avoid traditional high-cost and predatory products. According to a national survey of nearly 5,000 national EWA customers, ninety-three percent (93%) said they had a greater sense of financial control after using EWA, and ninety-one percent (91%) said they understood how the service works.
“Employees want pay flexibility so they can take care of bills on time, avoid overdraft fees, and manage their finances with confidence,” said Penny Lee, President and Chief Executive Officer of the Financial Technology Association. “We urge California to craft rules recognizing earned wage access as a consumer-friendly alternative to high-interest credit products.”
As the DFPI considers new requirements for earned wage access providers in California, FTA expressed support for the development of an EWA registry that would bring providers into a regulatory framework and allow the DFPI to learn more about how EWA products serve the needs of Californians. FTA also expressed support for consumer-friendly disclosure requirements, including clear disclosure of all fees, the 100-percent voluntary nature of any tip, not charging late fees, interest, or other penalties, not requiring a consumer’s credit score to determine eligibility, and not reporting to a credit reporting agency or debt collector.
FTA expressed concerns, however, that aspects of the DFPI’s current proposal would inadvertently quash innovation and deprive consumers of a valued financial tool. Specifically, FTA urged the DPFI to recognize that earned wage access products are not loans or credit, in line with assessments from other federal and state government entities. Unlike a loan product, EWA services never charge interest and are non-recourse, meaning consumers have no legal obligation to repay an advance. Customers can cancel the service at any time without penalty.
FTA also urged the DFPI not to classify gratuities, tips, and other voluntary payments as “charges,” as such a distinction would go against legal precedent and limit consumer choice. Read FTA’s full comment letter to the DPFI and FTA’s Just the Facts on Earned Wage Access to learn more.
The Financial Technology Association (FTA) is a Washington, DC-based trade association representing 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.