by On July 18, 2024, the Consumer Financial Protection Bureau (CFPB) published its proposed interpretative rule stating that earned wage access (EWA) products are subject to the Truth in Lending Act (TILA) and Regulation Z requirements. EWA products are called names such as ‘instant pay,’ ‘same day pay,’ and ‘pay on-demand.’ For background on the legal questions raised by EWA products, see our September 5, 2022 post, Regulatory Questions Remain About Pay On-Demand.
EWA products have grown in popularity throughout the U.S. in recent years. The CFPB found that EWA providers’ transactions grew by over 90% from 2021 to 2022, with more than 7 million workers accessing close to $22 billion in 2022 through these products. Many employers have added some form of ‘pay on-demand’ as a tool to recruit and retain workers.
The interpretive rule proposed by the CFPB would apply to EWA products provided through employer partnerships with vendors and those marketed directly to employee borrowers.
The proposed rule replaces the agency’s previous position via an advisory opinion that EWA products do not involve offering ‘credit’ as that term is defined in the TILA and Regulation Z. The proposed rule reverses that position and states that it applies to any product that involves both 1) “the provision of funds to the consumer in an amount that is based, by estimate or otherwise, on the wages the consumer has accrued in a given pay cycle” and 2) “repayment to the third party provider via some automatic means,” such as payroll deduction, at or after the end of the pay cycle.
The proposed rule also addresses various fees that are common with the use of EWA products. It requires notices regarding fees and provides limitations on actions regarding the assessing and collecting of fees.
Employers who offer EWA products to some or all of their employees should consult with their legal counsel regarding the proposed rule’s impact on their practices.
Stakeholders including vendors, employers, unions, and other members of the public have an opportunity to submit comments on the proposed rule. For details the text and commenting process for the proposed rule, see:
