Unpacking the CFPB’s Opinion on Earned Wage Access: Is It Credit?

Earned wage access (EWA) solutions enable workers to obtain some of the pay they’ve already earned before their regular payday. Companies such as DailyPay, PayActiv, and Even have offered these solutions for several years through partnerships with employers. These solutions can help consumers solve for financial shortfalls or ill-timed expenses without using high-cost credit or overdrawing a bank account.

As the number of EWA companies and employer interest have grown, the Consumer Financial Protection Bureau (CFPB) provided an opinion earlier this week on a key unknown: Are these credit products? The CFPB’s answer to that question is “no,” but only if the EWA solution meets certain criteria, a few of which are outlined below.

  • Employer partnership and integration: The solution must be offered through an employer to its employees, and earned wages must be based on employer records.
  • Free employee access to funds: Employees cannot be charged for accessing their earned wages.
  • Repayment from payroll deduction with no further claims: The amount accessed must be deducted from an employee’s next paycheck, and the EWA provider cannot attempt to collect from the employee if the EWA amount is not accounted for on payday.

It’s important to note that an EWA solution should not automatically be considered “credit” just because it doesn’t meet the definition above. Rather, this opinion provides regulatory certainty for a somewhat narrow segment of EWA solutions that have these characteristics.

The good news: There is now certainty on this previously unresolved issue so long as EWA providers meet the CFPB’s criteria. And several more providers that partner with employers can likely meet the CFPB criteria with a few tweaks to their business models.

The less-good news: It remains an open question whether EWA solutions not meeting the CFPB’s criteria—and especially variants offered directly to consumers rather than through employer partnerships—should be considered credit products. This is a big part of the market: Direct-to-consumer offerings from companies such as Earnin and Dave are used by millions of consumers. The CFPB notes that market participants can request further clarity from its Office of Innovation.

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