On Thursday, the Consumer Financial Protection Bureau (CFPB) proposed a new rule that would effectively reclassify Earned Wage Access (EWA) products as paycheck advance loans, despite the fact that EWA products do not carry an interest rate and offer consumers a low-cost alternative for accessing the money they’ve earned. The CFPB’s proposed rule forces EWA products to comply with lending regulations designed for high-interest payday loans – a win for the payday loan industry.

“Democrats have rightly criticized predatory payday loans, and earned wage access has emerged as a lower-cost way for workers to obtain their wages,” said Chamber of Progress CEO Adam Kovacevich. “But with this rule, Democrats are going to drive consumers back towards payday lending. Payday loan predators are this rule’s biggest winners. It’s sad to see a nominally progressive agency ignore the many reasons why millions of workers have flocked to earned wage access services.”

Unlike loans, EWA products are often no- or low-cost and because they are not loans, do not carry an interest rate. Instead, these products often rely on voluntary tips from users and fees for expedited wage delivery. Unlike payday loans, EWA products cannot trap users in debt because users are only able to access the wages they’ve earned.

For more on the CFPB’s regulatory attacks on fintech products, read Kovacevich’s op-ed, Big Banks Finally Have Lots of Competition, Dems Shouldn’t Squelch It.

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Chamber of Progress (progresschamber.org) is a center-left tech industry policy coalition promoting technology’s progressive future.  We work to ensure that all Americans benefit from technological leaps, and that the tech industry operates responsibly and fairly.  

Our corporate partners do not have a vote on or veto over our positions. We do not speak for individual partner companies and remain true to our stated principles even when our partners disagree.