In an 11th-hour move, the Consumer Financial Protection Bureau today rescinded an advisory opinion issued under the first Trump Administration that held that a particular type of earned wage access product is not “credit” under Regulation Z, which implements the Truth in Lending Act.
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 CFPB 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 CFPB’s rescission of its 2020 advisory opinion comes after the agency, this past July, had proposed an interpretive rule that concluded that EWA products are “credit” under Regulation Z. In response, the American Bankers Association submitted comments that contended that holding EWA products to be “credit” is contrary to the clear text of the Truth in Lending Act and would discourage banks from offering EWA products, limiting access to a convenient and potentially free source of small dollar, short-term liquidity. With the CFPB’s rescission of the 2020 advisory opinion, the agency does not appear intent on finalizing the interpretive rule.
