- ,Key insights: The Consumer Financial Protection Bureau in an advisory opinion said that “covered” earned wage access products should not be considered an extension of credit under the Truth in Lending Act.
- What’s at stake: Whether EWA should be considered credit is a core question framing state and federal regulation and advocacy.
- Forward look: The advisory opinion also said that expedited delivery fees and tips should not be considered finance charges.
UPDATE: This article includes comments from Mike Calhoun, president at the Center for Responsible Lending.
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The Consumer Financial Protection Bureau weighed in again as to whether earned wage access should be considered credit under the Truth in Lending Act in a new advisory opinion Monday, and formally rescinded a 2024 proposed interpretive rule that would have designated on-demand pay as a loan.
The CFPB contends that “covered” earned wage access products should not be considered an extension of credit under the Truth in Lending Act because workers are accessing their own earned wages and EWA “does not provide workers with the right to to defer payment of debt or to incur debt and defer its payments,” according to the
Covered EWA is described as having the following characteristics:
- employer-partnered;
- the amount accessed by the employee does not exceed accrued wages;
- accessing EWA is free for the employee;
- the provider has no recourse against the employee if an employer-facilitated deduction from the next paycheck is insufficient;
- engages in no debt collection or credit reporting activity;
- and, the provider does not assess the credit risk of employees.
It also said that expedited delivery fees and tips should not be considered finance charges, even in the case where EWA products meet the Regulation Z definition of credit, and formally withdrew a
“Covered EWA offers workers access to money that they are owed by virtue of work that they have already performed,” the advisory opinion said, adding its own italics. “Rather than the consumer’s repayment of a debt, the provider’s payroll process deduction from the payroll event associated with that work serves to ensure the consumer is not effectively compensated twice for the same work.
“They have had earlier-than normal access to wage amounts accrued, so they are owed less at payday. Fundamentally, Covered EWA resembles early wage payment and does not resemble an extension of credit,” according to the CFPB.
The advisory opinion is the latest whipsaw of the bureau’s stance on earned wage access and reinstates many of the core tenants of a November 2020 advisory opinion issued in the twilight of the first Trump administration. That advisory opinion was rescinded by outgoing Director Rohit Chopra on Jan. 15, 2025, in the final days before the second Trump administration took office.
Whether EWA should be considered credit is a core question framing state and federal regulation and advocacy. The CFPB’s advisory opinion is a win to EWA providers, which would face a greater compliance burden should EWA be considered a loan.
“Millions of workers rely on earned wage access to manage expenses by accessing the pay they have already earned. These products are not loans, and we appreciate the CFPB’s recognition of that, along with its withdrawal of a flawed 2024 proposed interpretive rule that previously mischaracterized EWA products,” said Penny Lee, president and CEO of the Financial Technology Association. “We look forward to engaging further with the CFPB to ensure parity for the different EWA business models (direct to consumer and employer sponsored) so all workers can access their already earned wages.”
Ian P. Moloney, chief policy officer at the American Fintech Council, called the advisory opinion a “constructive first step.
“We appreciate Acting Director Vought and the Bureau’s effort to bring greater clarity to a product that millions of workers rely on to manage their finances,” Moloney said. “By formally rescinding the 2024 proposed interpretive rule, which never had legal standing, the CFPB is appropriately acknowledging the inaccuracies in that proposal and resetting the conversation around how EWA operates.”
The National Consumer Law Center, which has been advocating that EWA be subject to TILA, rebuked the bureau’s interpretation, saying that at least six federal courts have rejected similar claims.
“Earned wage payday loans are loans, and just like traditional payday loans they trap consumers in a cycle of debt with exploding fees that force workers to pay to be paid,” said Lauren Saunders, associate director and director of federal advocacy at the National Consumer Law Center.
“Payday loan app lobbyists will undoubtedly try to use this faulty CFPB opinion to promote loopholes in state interest rate laws,” Saunders said. “But this action under Acting Director Vought is part of his effort to eliminate the CFPB and abandon its statutory consumer protection mission.
“States should
Mike Calhoun, president at the Center for Responsible Lending, told American Banker that the opinion was the latest in a string of moves made by the Trump administration “that gives financial technology firms a free pass from basic legal obligations that protect and inform consumers.
“This move also undercuts a level playing field with bank lenders, and other responsible lenders that comply with the laws of the states where they operate, and undermines the ability of states, as the primary fin-tech regulators, to protect their residents from high-cost loans using their well-established authority to enact usury laws,” Calhoun said.