The Innovative Payments Association (IPA) has submitted a detailed comment letter to the Consumer Financial Protection Bureau (CFPB) in response to the Bureau’s proposed 2024 Paycheck Advance Interpretive Rule. This proposed guidance has sparked significant concern within the electronic payments industry, particularly regarding how the CFPB defines and regulates earned wage access (EWA) products.

Key Concerns with the Interpretive Rule

In our letter, we outlined several areas where the proposed Interpretive Rule diverges from prior guidance and raises critical questions:

• Mischaracterization of EWA as “Debt”: The CFPB’s interpretation would classify all EWA products—even those with non-recourse features—as consumer debt. IPA strongly disagrees, noting that many EWA models do not impose any obligation to repay and lack the hallmarks of traditional credit.
• Departure from Previous Guidance: The Interpretive Rule appears to contradict the CFPB’s 2020 Advisory Opinion, which concluded that certain non-recourse EWA programs did not constitute credit under Regulation Z. The current proposal does not adequately address or justify this departure.
• Overbroad Application of TILA and Regulation Z: Treating all EWA products as credit under the Truth in Lending Act would impose significant compliance burdens and could hinder access to helpful financial tools for consumers, particularly when the products do not function like traditional loans.
• Definition of “Finance Charge”: The rule’s classification of expedited delivery fees and voluntary tips as finance charges creates practical challenges and could lead to misleading disclosures that do not reflect the nature of EWA services.
  
  

A Call for Greater Study and Stakeholder Engagement

We are urging the CFPB to pause and engage in additional study and dialogue before finalizing any new rule. EWA products are not one-size-fits-all, and thoughtful regulation should account for the diversity of models in the market. Importantly, many of these tools were developed in response to consumer demand and prior CFPB guidance promoting financial innovation.

Download the comment letter to read our full response, including citations, case references, and proposed alternatives.

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.