Federal and state regulators are taking a closer look at how to regulate a fast-growing fintech field that connects workers with advances on their earnings.
So-called earned wage access products allow employees to obtain pay they have earned ahead of their regular payday. As the industry has grown, there has been an ongoing debate about whether the products should be considered extensions of credit, such as a loan, requiring standard disclosures and other protections.
The Consumer Financial Protection Bureau has signaled its interest. Tucked away in a recent announcement revoking a sandbox letter for EWA provider Payactiv was a warning that the agency might soon step in to provide more explicit edicts.
"The CFPB has received requests for clarification regarding its advisory opinion on 'earned wage access' products," the agency said in a June 30 release. "The CFPB plans to issue further guidance soon to provide greater clarity concerning the application of the definition of 'credit' under the Truth in Lending Act and Regulation Z."
The termination of Payactiv's sandbox letter, which gave the company regulatory protection from key lending rules, came at the company's request. The firm said it wanted to make changes to its business strategy without incurring a lengthy review from the CFPB, though the CFPB had already told Payactiv it was considering terminating the letter as a result of public statements from the company “wrongly suggesting a CFPB...
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