Financial Technology Association logo

Earned Wage Access (EWA) offers consumers flexibility through earlier access to their earnings, helping them make timely payments, avoid overdraft fees and high-cost credit, and manage their everyday spending.

  • EWA allows an employee to access funds based on earned wages that have not yet been deposited into their account, helping them smooth out cash flow between payroll cycles, which can be as infrequent as monthly.
  • It is estimated that one in five families have less than two weeks of liquid savings, which leaves them exposed to financial shocks. And this average does not account for racial inequities, as Black and Hispanic households are considerably more likely to face financial emergencies than white households.
  • In the event of unexpected costs, a survey of EWA users found that many historically had to rely on overdrafts (which on average cost nearly $34 per occurrence), or high-cost credit card debt and payday loans.
  • An EWA service, by comparison, typically costs between $2.59 – $6.27 per occurrence to use across different service models. EWA makes it easier and more flexible for customers to manage their spending and avoid getting into debt because it is simply early access to already earned wages.
    • A 2021 study of EWA users shows that EWA services can provide consumers with a safe alternative to avoid missing bills or sliding further into debt, and found that without these services, 44 percent of consumers would be unlikely to pay their bills on time, and 38 percent would consider going into overdraft.

There are two predominant EWA service models – the employer-based and the direct-to-consumer (D2C); both serve different consumer needs.

  • With an employer-based model, individual employers team up with an EWA provider to offer their employees early access to wages.When the advance is scheduled to be repaid, EWA providers typically deduct the repayment amount directly from the employee’s paycheck. There is typically a fee for this service, which is sometimes covered by the employer, the employee, or a combination of the two.
  • The D2C model can provide early access to income directly to any consumer who receives recurring direct deposits from an employer or other business. A broader range of customers can access D2C, including those who do not have this benefit through their employer, including gig economy workers, freelancers / contractors, and non-profit and public sector employees.
    • Consumers may pay for this product through a monthly subscription fee, a fee per transaction, a voluntary tip amount, or a hybrid of a subscription fee plus a per-transaction or voluntary fee or tip. D2C EWA providers commonly offer a version of the service to customers that imposes no mandatory fees.
  • EWA services are typically non-recourse and do not charge interest. This means that consumers have no legal obligation to repay an advance and providers cannot take legal action to collect payments. Customers can decide not to repay their advance at any time by revoking the authorization related to their linked bank account.[1] There is typically no credit pull or credit reporting associated with this service.  Failure to repay an advance does, however, usually limit access to additional EWA advances until the earlier advance is repaid. 

While EWA services are subject to important consumer protections, regulatory clarity is needed to resolve ambiguity that chills consumer-centric product innovation.

  • All EWA models are subject to general consumer protections, including state fair treatment of customers (UDAP) laws, but there is currently no specific EWA law or regulation in any state or at the federal level.
  • There is existing ambiguity on the regulatory categorization of certain EWA services, though CFPB exemptions to the payday rule, Treasury Department guidance on EWA treatment, and state proposals appear to recognize that many EWA models are generally different from a traditional loan.
  • In 2020, the CFPB issued an Advisory Opinion stating that ‘a Covered EWA Program’ does “not involve the offering or extension of ‘credit,’” and thus, do not fall under the purview of Regulation Z, which implements the Truth In Lending Act (“TILA”). A ‘Covered EWA Program’ must, among other things, contract with the employer to offer and provide EWA services.
    • However, the opinion did not reference D2C models, leaving it unclear as to how these models should be treated. Furthermore, the issue has prompted the CFPB Acting General Counsel earlier this year to recommend that the Bureau provide “greater clarity on these types of issues” across the EWA landscape.

The FTA supports regulation that promotes consumer choice, protection, and transparency.

  • EWA products lack the characteristics of credit products and should not be regulated under existing credit frameworks at the federal or state level.  Doing so would have significant implications for how these programs are treated and may constrain consumer choice and product availability, which will push individuals to high-interest, potentially predatory loans.
  • FTA members are committed to EWA standards that promote consumer protection and transparency, including state registration requirements.
    • However, all EWA services, regardless of the business model adopted by the provider, should be treated similarly in order to avoid anti-competitive market developments, and to allow the service to be provided to the widest possible customer segment.
    • For example, according to a recent research report, “gig workers” currently represent approximately 36 percent of all workers in the U.S. economy, and by 2023, it is projected that more than half of the U.S. workforce will either be gig workers or have worked independently at some point in their career. EWA services should be accessible to this portion of the U.S. workforce, as well as by full-time salaried employees.
  • FTA members look forward to working with regulators to advance consumer choice and key consumer protections, including through standardized disclosures and overdraft mitigation efforts.

Access a full PDF of FTA’s Just the Facts on Earned Wage Access here.