Maryland Legal Alert for Financial Services

On July 18, 2024, the Consumer Financial Protection Bureau (CFPB) issued a proposed rule that would regulate earned wage access products as traditional credit products.

Traditional earned wage access products allow consumers to access their earned wages before a scheduled pay date.  Earned wage access products have been treated outside of the “credit” regulatory framework because of a 2020 CFPB advisory that held that an earned wage access product was not an extension of credit if certain conditions were met.

The 2020 advisory relied on these characteristics of earned wage access offerings to determine at that time, that these products were not credit and not subject to disclosures under the federal Truth in Lending Act (TILA) and its implanting Regulation Z (Reg. Z):

• The product provided no more than the amount of accrued wages, 
• The product was offered through a third party integrated with the related employer,
• No consumer payment was required and the product provided no recourse or collection activities, and;  
• No underwriting or credit reporting was included.

The recent proposed rule retracts the 2020 advisory and notes that it was issued for a narrow type of earned wage access product and caused industry confusion.

The new rule would apply to earned wage access products that involve the provision of funds to a consumer in any amount based on the wages of such consumer in a given pay cycle (even if by estimate) and provide for repayment of the advanced amount by  automatic means (e.g., payroll deduction or preauthorized debit).  Under the new rule, traditional “cost of credit” disclosures would be required in connection with a covered earned wage access product.  Notably, the proposed rule would expand the TILA and Reg. Z definition of “finance charge” to include voluntary fees (such as “tips” or “gratuities”) and expedited delivery fees.  The proposed rule has a comment period that closes on August 30, 2024.  

For questions concerning this topic, please contact Christopher R. Rahl.

Contact Christopher R. Rahl | 410-576-4222