CFA joined 95 consumer, labor, civil rights, legal services, faith, community and financial organizations and academics in a letter to the Consumer Financial Protection Bureau (CFPB) to express concerns about the treatment of earned wage access (EWA) products. While free earned wage advances may be a better option for consumers than costly payday loans, these products are not without risks.
The groups urged that viewing earned wage advances, especially fee-based ones, as something other than credit will lead to evasion of consumer protection and fair lending laws and that the CFPB should regulate fee-based earned wage access products as credit. Usage of earned wage access products have grown in recent years. These products vary considerably, from ones that are completely free and are offered through employers, to fee-based products, to products that have no connection to employers. The trend is for 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 letter further urged the CFPB to rescind the Bureau’s November 2020 EWA Advisory Opinion or to revise its unsound reasoning to prevent evasions of credit laws and to revisit the December 2020 Compliance Assistance Sandbox Approval Order regarding PayActiv for the same reason, and to order PayActiv to cease misusing the order. Finally, the groups urged the Bureau to eliminate or significantly alter the “innovation” programs adopted in the last few years, which have resulted in a secretive, one-sided process for industry to seek exemptions from or skewed interpretations of critical consumer protection laws without any input from consumers, competitors, or the general public.