CFPB Must Regulate Fee-Based Earned Wage Access Products
CFA has joined 95 consumer, labor, civil rights, legal services, faith, community, and other financial organizations urging the Consumer Financial Protection Bureau (CFPB) to reverse two actions regarding earned wage access (EWA) products that threaten to create dangerous loopholes in federal consumer protection and fair lending laws and that are being misused to promote fintech exemptions in state laws, particularly usury laws.
In the letter the organizations explain that EWA products have increased in recent years, and that these “…products vary considerably, from ones that are completely free and are offered through employers, to potentially expensive fee-based products with no connection to employers. The trend is for some employers to offer these products for free, making it especially inappropriate to carve loopholes for fee-based products in consumer protection laws covering credit.”
The organizations wrote that while “free earned wage advances may be a better option for consumers than costly payday loans, these products are not without risks,” and that viewing earned wage advances, “as something other than credit will lead to evasion of consumer protection and fair lending laws.” Further, the groups noted that “treating earned wage access products as credit does not mean that they should not exist. Free or very low-cost programs that are repaid entirely through payroll deduction or otherwise without debiting bank accounts or delaying receipt of wages may be a better alternative to high-cost payday loans.”
The groups also urged the CFPB to:
- Treat fee-based earned wage access products as credit and revoke the EWA advisory opinion, or revise it to focus only on whether providers of free programs are “creditors” covered by Truth In Lending Act (TILA);
- At a minimum, revisit and order PayActiv to cease misusing and misrepresenting the approval order;
- Supervise fee-based earned wage access providers under the CFPB’s authority over payday loans;
- Conduct research on the impact of earned wage access programs;
- Terminate or significantly revise the Advisory Opinion Program and Compliance Assistance Sandbox program and revisit the Bureau’s other “innovation” programs
“These actions were taken without input from consumers, competitors, or the public, and threaten to evade critical consumer protection laws,” said Rachel Gittleman, CFA’s Financial Services Outreach Manager. “Innovation should not be used as a shield from public input or consumer protection laws and regulations, and we urge the CFPB to revisit these problematic actions.”
CFA Supports Senate Confirmation of CPSC Chair
The U.S. Senate has voted to confirm Alexander Hoehn-Saric as Chair and Commissioner for the U.S. Consumer Product Safety Commission (CPSC).
“The Senate confirmation of Alex Hoehn-Saric as Chair of the CPSC is good for consumers,” stated Rachel Weintraub, Legislative Director and General Counsel at Consumer Federation of America. “We look forward to working with Chair Hoehn-Saric to ensure that the CPSC upholds its responsibility to protect consumers from the hazards posed by unsafe products.”
Hoehn-Saric brings a substantial amount of experience to the role, most recently serving as Chief Counsel for the Subcommittee on Consumer Protection and Commerce of the House Energy and Commerce Committee. Hoehn-Saric also previously served as Senior Counsel to the Subcommittee on Consumer Protection, Product Safety, and Data Security of the Senate Committee on Commerce, Science and Transportation. He has also held numerous other roles at the Federal Communications Commission, and the Department of Commerce.
Since August 2021, the Commission has operated with a Republican majority. Hoehn-Saric’s confirmation again creates a 2-2 tie in the CPSC.
“We are grateful for Acting Chair Adler’s leadership of the Commission especially given the challenging period of the COVID -19 pandemic,” said Weintraub. “The Commission has conducted critically important recalls and has issued important research about product safety during the pandemic.”
CFA Supports House Bills Aimed to Strengthen Investor Protections
Several pro-investor bills being discussed in the House Financial Services Committee have earned the interest and support of the Consumer Federation of America. In a letter sent earlier this month to members of the House Financial Services Committee, CFA expressed support for the following bills, each of which respond to weaknesses in the regulatory regime governing the securities markets or propose sensible avenues to strengthen investor protections.
CFA expressed support for the following:
- Amending the Securities Exchange Act of 1934 regarding the Office of the Investor Advocate and other changes.
- Empowering States to Protect Seniors from Bad Actors Act
- Prohibiting registered investment advisers, brokers, and registered representatives of brokers from facilitating the transaction of or recommending the securities of certain special purpose acquisition companies (SPACs), and for other purposes.
- Passing the Investor Choice Act of 2021
- Passing the Investor Justice Act
- Amending the Securities Exchange Act of 1934 to improve the governance of multi-class stock companies, to require issuers to make annual diversity disclosures, and for other purposes, and the
- Passing the Whistleblower Protection Reform Act
“These legislative proposals align closely with CFA’s mission of consumer and investor protection, and we are hopeful that these commonsense bills continue to advance and are ultimately signed into law,” said CFA’s financial services counsel, Dylan Bruce.
Registration Open for 15th Annual America Saves Week
America Saves has opened registration for their Annual America Saves Week. Established in 2007, America Saves Week is both an annual celebration as well as a call to action for everyday Americans to commit to saving successfully.
The focus of the conference this year is Building Financial Resilience, in direct response to the financial difficulties consumers faced because of the COVID-19 pandemic.
“At a time when so many Americans are still navigating the effects of the pandemic, we are committed to continuing to be a trusted resource and leading voice for Americans who want real-life perspectives and strategies,” said Kia McCallister-Young, America Saves Director of Communications of this year’s conference.
The five-day event will cover saving topics, including: saving automatically, saving for the unexpected, saving to retire, saving by reducing debt, and saving as a family.
“We’re using the Week this year as an excuse to get all hands on deck, from employers to institutions, to provide support and resources to build financial stability for savers,” said Amelia O’Rourke-Owens, the Associate Director of America Saves.