IPA Comment Letter on California EWA Regulation: A Summary

This document summarizes the key points of the Innovative Payments Association's (IPA) comment letter on the California Department of Financial Protection and Innovation's (DFPI) proposed rulemaking for Earned Wage Access (EWA) providers.

Main Concerns
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• One-size-fits-all approach: The IPA argues that the proposal doesn't differentiate between EWA models. Not all EWA products function like loans.
• Misleading consumer information: The proposed rules might confuse EWA fees with payroll card fees.
• Unfair classification: The IPA believes some EWA models shouldn't be classified as loans under the California Financing Law (CFL).
  
  

What the IPA Wants

• Recognition of EWA Model Variety: The DFPI should acknowledge the various EWA models, with some not resembling loans.
• Clearer Fee Definitions: The rules should distinguish between EWA fees and payroll card fees to avoid confusion.
• Exemption for Non-Loan EWA Models: The IPA urges the DFPI to exempt certain EWA models from the CFL, reflecting their non-credit nature.
  
  

Employer-Based EWA Models

The IPA emphasizes that employer-based EWA models differ from direct-to-consumer models and shouldn't be treated as loans. They outline the reasons for this distinction:

• Employer-based models rely on integration between the EWA provider, employer, and payroll processor.
• Repayment for employer-based models comes directly from the employer via payroll deduction.
  
  

Benefits of EWA Services

The IPA highlights the advantages EWA products offer consumers:

• Helps manage financial stress by providing access to earned but unpaid wages.
• Offers a cheaper alternative to payday loans and overdraft fees.
• Some services are free or offer financial literacy resources.
  
  

Recommendations

• Revise the proposal to acknowledge that employer-based EWA models are not loans under the CFL.
• Consider additional steps to level the playing field between different EWA models.
  
  

Conclusion

The IPA encourages the DFPI to consider the feedback from industry stakeholders and refine the proposed rulemaking to ensure it protects consumers without hindering access to valuable EWA services.

Download Comment Letter