The Consumer Financial Protection Bureau’s proposed interpretive rule governing earned wage access products will discourage banks from offering these products, limiting access to a convenient and potentially free source of small dollar, short-term liquidity, the American Bankers Association wrote in a comment letter submitted to the CFPB on Friday.
EWA products allow an employee access to his or her earned wages prior to the employee’s payday, typically without requiring any fee or other payment from the employee. In 2020, the bureau issued an advisory opinion that concluded that EWA products that do not require or allow any payment from the employee are not “credit” under Regulation Z. The proposed interpretive rule would rescind the 2020 advisory opinion and reach the opposite conclusion—that all EWA products are “credit” under the Truth in Lending Act and thus subject to Regulation Z’s requirements.
ABA contended that the clear text of TILA precludes the CFPB from defining EWA products as “credit.” The proposed interpretive rule also is arbitrary and capricious because it would reverse the CFPB’s 2020 advisory opinion without a reasoned explanation for the reversal, according to the association. Finally, ABA said that the interpretive rule constitutes rulemaking in violation of the Administrative Procedure Act because it has the hallmarks of a legislative rule—it would impose new obligations on EWA providers.
“Product by product, the Bureau appears intent on eliminating valued forms of short-term liquidity despite its statutory mission to expand access to financial products and services—not restrict access,” ABA said.
