Today, D.C. Attorney General Brian Schwalb filed suit against earned wage access (EWA) provider EarnIn, which enables workers to access a portion of their already-earned wages in between pay periods. Despite the fact that EWA products do not carry an interest rate, the Attorney General alleges that EarnIn is “illegally providing high-interest loans to more than 20,000 D.C. consumers.”

Unlike loans, EWA products are often no- or low-cost and 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.

“When the government goes after earned wage access, payday lenders are the biggest winners,” said Chamber of Progress Founder and CEO Adam Kovacevich. “AG Schwalb is charged with protecting consumers, not limiting their financial options based on a misunderstanding of how earned waged access works. This suit ignores the many reasons why thousands of D.C. workers use these services to help pay their bills.  Going after these services will only drive consumers back to the devastating debt cycles associated with payday lenders.”

In July, the Consumer Financial Protection Bureau (CFPB) proposed a new rule that would effectively reclassify EWA  products as paycheck advance loans. The CFPB’s proposed rule forces EWA products to comply with lending regulations designed for high-interest payday loans – another win for the payday loan industry. In contrast, states like Wisconsin and South Carolina have recently passed pro-consumer regulations for EWA providers, like requiring EWA apps to offer a free service tier and barring them from punishing customers who choose not to tip.

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