Don’t miss another episode of Truth In Data! Click on the red bell in the lower-left corner of your screen to receive notifications as soon as the episode publishes.
Data for today’s episode is provided by Mercator Advisory Group’s Blog – CFPB Provides an Opinion on Earned Wage Access, Raising More Questions
The CFPB Offers Opinion on Early Wage Access
- CFPB advisory opinions are designed to provide clarity around a particular regulatory topic that has been identified by a requestor. In this instance, Early Wage Access.
- There are two predominant models of Early Wage Access: employer-based solutions, procured by employers for workers and “pay advance” where employees enroll directly with a provider.
- 45 million Americans either struggle to pay bills currently or a single unexpected expense could send them into financial distress.
The CFPB concludes that Early Wage Access is NOT a credit product as long as:
- The EWA is offered as an employee benefit.
- The amount provided through EWA does not exceed the amount of earned wages verified by the employer.
- The provider recovers the advance through a payroll deduction only.
- The employee must be offered a choice of accounts where the funds can be deposited.
- The employee makes no payment, voluntary or otherwise, to access EWA and agents do not solicit or accept tips or any other payment.
About Blog
On Nov. 30, 2020 the Consumer Financial Protection Bureau (CFPB) issued an Advisory Opinion on whether or not an Earned Wage Access (EWA) program is an extension of credit to the participating workers, and as a result must comply with the protections and requirements of Regulation Z.
These programs don’t have to comply with Regulation Z as long as they meet the criteria that the opinion outlines.
While this opinion helps to provide clarity for employers, EWA providers and state legislators who are considering their own set of rules, a host of new questions arise with the issuance of this document.