IPA Challenges CFPB's Paycheck Advance Rule

The Innovative Payments Association (IPA) recently filed a comment letter criticizing a proposed rule by the Consumer Financial Protection Bureau (CFPB) that would classify earned wage access (EWA) products as debt under Truth in Lending Act (TILA) regulations.

Key Points of the IPA's Argument:

• EWA products are not debt: The IPA argues that many EWA models, especially employer-integrated ones, don't create a debt obligation for the employee. They simply provide access to already earned wages.
• CFPB's definition of "debt" is flawed: The CFPB relies on the act of repayment to define debt, while the IPA argues that debt requires an obligation to repay.
• Current rule creates confusion and unnecessary burden: The IPA believes applying TILA regulations to EWA will increase compliance costs and lead to confusing disclosures for consumers.
• CFPB should defer to Congress: The IPA highlights ongoing Congressional efforts to create specific EWA regulations and suggests the CFPB should wait for legislative action.
  
  

The IPA's Concerns with the Rule:

• Broad application: The rule applies to all EWA products, not differentiating between recourse and non-recourse models.
• "Finance charges" definition: The CFPB considers voluntary tips and expedited transfer fees as "finance charges," creating compliance challenges.
• Negative impact on consumers: The IPA fears the rule could limit access to EWA products and push consumers toward more expensive alternatives like payday loans.
  
  

The IPA's Recommendations:

• Reconsider the "debt" classification: The IPA urges the CFPB to recognize the different EWA models and exempt non-recourse products from TILA.
• Re-evaluate "finance charges": The IPA argues that voluntary tips and avoidable fees shouldn't be considered "finance charges."
• Conduct further study: The IPA suggests the CFPB conduct a more thorough study of the EWA market before finalizing the rule.
  
  

Overall, the IPA is advocating for a more nuanced approach to regulating EWA products, arguing that the current CFPB rule creates unnecessary burdens and may not effectively address consumer protection concerns.

Download Comment Letter

IPA on EWA