The federal Consumer Financial Protection Bureau (CFPB) has issued a proposed interpretive rule on earned wage access (EWA) [CFPB, News Release, 7-18-24]. The proposal classifies EWA products as consumer loans subject to the federal Truth in Lending Act (TILA).
The proposed interpretive rule applies to products that involve both an estimate of wages earned in a pay cycle and repayment to a third-party provider through some automatic means, such as a payroll deduction or preauthorized account debit.
State EWA Laws
The CFPB’s proposed rule goes against recent state laws on EWA services. Laws enacted in Kansas, Missouri, Nevada, South Carolina, and Wisconsin, which PAYO supported, say that certain EWA services are not loans and not subject to state banking and finance laws governing loans.
State EWA laws include consumer protections without trying to define EWA services under existing financial laws. These state laws include requirements to disclose all fees and methods used by vendors to provide EWA services. They also create government agency oversight at the state level to prevent predatory practices.
The CFPB proposal is not final and state laws and guidance should still be followed.
Interested in more state and local payroll coverage? PayrollOrg’s PayState Update eNewsletter is perfect for you.
Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
