WASHINGTON– More than 160 consumer, labor, civil rights, faith-based, and community organizations will submit a comment letter to the Consumer Financial Protection Bureau (CFPB) today in support of its proposed interpretive rule ensuring important legal protections for consumers who use earned wage advance (EWA) or other fintech cash advance products that need to be repaid with the borrower’s next paycheck.
“Cash advance apps that call themselves ‘earned wage access’ are just payday loans in disguise,” Lauren Saunders, associate director of the National Consumer Law Center, said in a statement. “Workers should not have to pay to be paid or be subject to payday loans with costs disguised in ‘tips,’ 'expedite fees' or other junk fees. A tip is paid to a human being who serves you; it is not a legitimate way to disguise the cost of predatory loans.”
The Center for Responsible Lending (CRL) and the National Consumer Law Center (NCLC), signatories to the coalition letter, also expressed strong support for the rule and called for more transparency in fee disclosures in separate, more detailed comment letter that the groups will submit to the agency today.
What Rule Does
The proposed interpretive rule classifies EWA and cash advance products as credit. Furthermore, it classifies tips and expedited delivery fees as finance charges that must be disclosed to borrowers in line with the federal Truth in Lending Act (TILA).
"Earned Wage Advance products are nothing more than workplace payday loans made available on a cell phone, which the industry continues to aggressively peddle to vulnerable, lower-wage workers, particularly people of color and women," Christine Chen Zinner, senior policy counsel, Americans for Financial Reform, said in a statement. "The CFPB must continue to make sure that these products are treated as the loans that they are, with all the same disclosures as other loan products."
What Letter States
The coalition letter to the CFPB states, in part, that:
- “Workers should not have to pay to be paid, and we support the CFPB’s efforts to guard against predatory lending in the workplace and to prevent evasion of consumer protection laws by new forms of payday loans.”
- “Lenders should not be allowed to disguise 300% APR loans in so-called ‘tips,’ expedite fees or other junk fees, or by claiming that their loans are not loans. Advances of wages or other income, repaid later, are loans regardless how they are styled. All payday advances need clear cost and fee disclosures. Workers of color and lower-income workers are particularly susceptible to predatory lending practices as they may have less access to traditional banking services and products, and are also less likely to be paid a living wage.”