CFPB Rescinds 2020 Advisory Opinion On EWA Products

The Consumer Financial Protection Bureau (CFPB) issued a new advisory opinion rescinding its November 2020 guidance on earned wage access (EWA) products. This previous guidance had exempted certain EWA products from being classified as “credit” under the Truth in Lending Act (TILA) and Regulation Z.

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EWA products and 2020 advisory opinion

EWA products, as explained by the CFPB, address the mismatch between when workers receive compensation and when they incur expenses. These products come in two main models: employer-partnered and direct-to-consumer.

The 2020 advisory opinion stated that EWA products meeting specific criteria were not considered “credit” under TILA and Regulation Z but remained silent on products not meeting all criteria. This led to substantial regulatory uncertainty, as few, if any, products in the market fit the narrow criteria outlined.

Rescinding the opinion and industry response

In rescinding the 2020 opinion, the CFPB cited several flaws in its legal analysis. These included insufficient consideration of state laws in defining “debt” and inadequate justification for inferring that consumers do not incur liability when using certain EWA products.

Tal Clark, Chief Executive Officer (CEO) of Instant Financial, Inc., stated that while the rescinded advisory opinion provided a framework for business-to-business EWA, it was limited in scope.

He views the CFPB’s decision as an opportunity for the agency to recognize other recovery methods that effectively serve clients and their employees. Clark ultimately hopes “reason prevails, as it is quite the leap to position employees accessing their wages when earned somehow qualified as a loan.”

New rule proposal continues debate

In July 2024, the CFPB proposed a  new interpretive rule on this topic (EWA products), with the public comment period closing on August 30, 2024. This move appears to signal the CFPB’s intent to provide clearer guidance on this evolving market.

However, the CFPB’s proposed rule resulted in more debate about the treatment of EWA products. Clark  explained , “The CFPB ‘s proposed rule fundamentally misinterprets earned wage access as a form of credit, and ignores the 2020 advisory opinion that specifically recognizes that EWA transactions do not constitute it as such.”

More comments express concerns

The proposed rule received nearly 150,000 comments. Other EWA providers, such as DailyPay Inc., believe the proposed rule would result in issues for workers, employers, and EWA providers, and encouraged the bureau to “start over.”

It stressed the “one-size-fits-all approach does not match the wide variety of EWA business models and the ‘credit’ label is especially ill-suited to the unique features of non-recourse, employer-integrated EWA that settles through payroll, which, as recognized in the November 2020 advisory opinion, functionally provides access to the consumer’s existing assets (i.e., earned pay) and is not credit.”

According to a spokesperson for the CFPB, the interpretive rule on EWA is still pending as of January 22, 2025.