CFPB Says Truth In Lending Regs Do Not Apply to "Earned Wage Access" Providers
Commentary by Steven Lofchie
In an advisory opinion, the Consumer Financial Protection Bureau ("CFPB") clarified the definitions of the terms "credit" and "finance charge" as they apply to "Covered Earned Wage Access" under Truth in Lending Act rules ("Regulation Z").
The guidance established that "Covered EWA" products are not considered credit because they do not involve a debt or the right to defer payment of a debt. The CFPB said that to qualify as Covered EWA, a transaction (i) must not exceed the accrued cash value of wages earned, (ii) must utilize a payroll process deduction at the next payroll event, and (iii) the provider must warrant that it has no legal or contractual claim against the worker if the deduction fails. Further, the provider must not engage in debt collection activities, report to consumer reporting agencies, or assess the credit risk of individual workers.
The CFPB expanded upon previous guidance by clarifying that the method of payroll deduction does not need to be an employer-facilitated deduction specifically, but can include other payroll process deductions used by direct-to-consumer providers. Additionally, the regulator determined that the cost of the product is not relevant to whether it constitutes credit; concluding that a product does not need to be free to the consumer to qualify as Covered EWA, provided it meets the other criteria regarding the absence of debt and recourse.
Regarding fees, the CFPB stated that because Covered EWA is not credit, any associated fees cannot be finance charges. Even if a product were considered credit, the regulator concluded that expedited delivery fees and tips are generally not finance charges because they are not imposed by the provider. Specifically, expedited delivery fees are not finance charges if the consumer has a reasonable option to receive funds more slowly for free, and tips are not finance charges if they are voluntary and not effectively imposed through the provider's practices.
The advisory opinion became effective on December 23, 2025. To rely on this relief, providers must explain and warrant to the worker that they have no legal or contractual claim against the worker if a payroll deduction is insufficient. The CFPB said the guidance serves as an interpretive rule, providing a "safe harbor" from liability for acts done in good faith conformity with the rule.
Commentary
The CFPB's move to regulate EWA as "credit" in the name of protecting borrowers, more likely had the effect of making it more difficult for workers to get access to needed funds.