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On December 23, the CFPB issued an advisory opinion stating earned wage access products fall outside the definition of credit under TILA's Regulation Z, withdrawing a Biden-era proposed interpretive rule that identified all such products as credit.
Under the CFPB's guidance, "covered" EWA products do not constitute credit. Covered EWA arrangements are limited to advances that do not exceed a worker's earned wages and that require repayment solely through employer-facilitated payroll deduction. In addition, the provider must represent that it has no legal or contractual recourse for amounts not repaid (i.e., no debt collection efforts), must not report repayment activity to consumer reporting agencies, and must not assess an employee's credit risk.
In addition, the Bureau stated that expedited delivery fees and tips are not finance charges because they are not imposed by the provider. The Bureau did not address direct-to-consumer, non-covered EWA products in the opinion. It also stated that nothing in the opinion should be construed to cover other types of EWA products.
Putting It Into Practice: Earned wage access products have been a major focus of both state legislatures and federal regulators this year (previously discussed here, here, and here). The CFPB, in particular, has taken a shifting—at times inconsistent—approach to regulating the product. Although the advisory opinion is likely to be welcomed by industry participants, it is narrowly framed, and its practical impact remains uncertain. Market participants should closely monitor both federal and state developments and evaluate whether existing and planned EWA offerings remain aligned with evolving regulatory expectations.
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