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) is writing to the Department of the Treasury to comment on the President's 2025 Budget Proposal regarding on-demand pay (ODP). The IPA argues that the Proposal's definition of ODP is inaccurate and that the Proposal would create a significant administrative burden for businesses. The IPA also argues that the Proposal would not have a significant impact on tax revenues.

The IPA recommends that the Treasury Department revise the Proposal to reflect a more accurate description of the current ODP marketplace and to acknowledge that the vast majority of ODP arrangements are offered by third-party providers. The IPA also recommends that the Treasury Department clarify that disbursements made via a third-party ODP provider should be excluded for tax purposes at the time of their disbursement.
​
Overall, the IPA is concerned that the Proposal would make it more difficult for businesses to offer ODP to their employees. The IPA believes that ODP is a valuable tool that can help employees manage their finances and avoid costly payday loans.

The Innovative Payments Association (IPA) is urging the California Department of Financial Protection and Innovation (DFPI) to clarify its proposed regulations for Earned Wage Access (EWA) providers.

The IPA, which represents a number of EWA providers, argues that the current draft of the rule may create confusion and unnecessary burdens on businesses. Specifically, the IPA is concerned about the rule's reporting requirements and fee definitions, which could lead to misleading information for consumers.

The association believes that not all EWA transactions should be treated as loans under California law. They argue that many EWA models do not resemble credit and should be exempt from the California Financing Law (CFL).
The IPA is calling on the DFPI to:

• Clarify the distinction between EWA fees and payroll card fees.
• Acknowledge the diversity of EWA models.
• Recognize that not all EWA transactions are loans.
  
  

The IPA hopes that these revisions will help create a more equitable and effective regulatory framework for EWA providers in California.

The Innovative Payments Association (IPA) is urging California's Department of Financial Protection and Innovation (DFPI) to refine its proposed regulations for Earned Wage Access (EWA) providers. The IPA argues that the current draft lumps together all EWA products, potentially creating unnecessary burdens and misleading consumers.
Key Concerns:

• One-size-fits-all approach: The IPA believes the proposal fails to acknowledge the diversity of EWA models. Not all EWA products function like loans.
• Misleading consumer information: The current rules might confuse EWA fees with separate payroll card fees.
• Unfair classification: The IPA argues that some EWA models shouldn't be classified as loans under California's Financing Law (CFL).

What the IPA Wants:

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

The IPA believes a more nuanced approach is essential for regulating EWA effectively and protecting consumers. They emphasize the importance of regulatory clarity for this relatively new financial tool.

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
​

• 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.