CFPB Proposes Interpretive Rule Characterizing Earned Wage Access Products As Loans

On July 18, the CFPB proposed a new interpretive rule that would characterize earned wage access ("EWA") products as extensions of credit and subject to the Truth in Lending Act and Regulation Z. Under the interpretive guidance, both the "tipping" function on EWA products, and the "expedited funds delivery fee" would be treated as finance charges, and would require the creditor to make the disclosures required for unsecured extensions of credit under Regulation Z. However, an employer-sponsored program which is provided at no cost to the employee (i.e., without what the CFPB has deemed a "finance charge") would not require such disclosures.

In the last few years, programs that enable employees to have early access to their wages have exploded in popularity. Two types of EWA models dominate the marketplace—employer partnered products, and direct-to-consumer. For "employer-partnered" products, providers contract with employers to offer funds in amounts that do