Fintech Trade Group Sends Letter to Director Chopra Urging CFPB to Develop Regulatory Approach for Earned Wage Access Products

The American Fintech Council (AFC), a trade group whose members include providers of earned wage access (EWA) products, has sent a letter to Director Chopra urging the CFPB to take steps towards development of a “pragmatic regulatory approach” for regulating EWA products. 

In its letter, AFC discusses the “patchwork approach” to regulating EWA products that is emerging at the state level.  While expressing its approval of the “bespoke regulatory framework for EWA” in Nevada and Missouri, AFC states that it “disagrees with the approach of shoehorning EWA products into existing lending laws, pursued by other states.”  (The California Department of Financial Protection and Innovation (DFPI) has issued a proposal that would require providers of income-based advances such as EWA products to register with or obtain a license from the DFPI and comply with the fee and interest rate limits of the California Financing Law (CFL)).  AFC indicates that regardless of the approach taken by states, “pragmatic federal engagement on this matter is necessary.”

AFC observes that the CFPB has to date “opted to pursue less comprehensive or binding guidance with regards to EWA,” citing to the CFPB’s November 2020 Advisory Opinion (AO), and that it initially agreed with this approach “as it allowed the industry to develop responsible options that fit the demands of consumers, without significant limitations to their business models.”  AFC states that it now believes a “more substantive regulatory endeavor, such as a formal rulemaking” is necessary in light of market and state developments since the CFPB issued the AO.  While expressing its preference for notice and comment rulemaking by the CFPB, AFC states that it “remains open to understanding and supporting the regulatory tool that will ultimately serve consumers and responsible industry participants best.”  AFC asks the CFPB “to convene a meeting with relevant stakeholders” to facilitate a discussion regarding regulatory approach.