Bipartisan Bill Seeks First Federal Rules for Earned Wage Access

A bipartisan earned wage access bill has been introduced in the House Financial Services Committee — the first step in establishing a federal law that would govern earned wage access to paychecks. 

Rep. Bryan Steil, R-Wis, and Rep. Ritchie Torres, D-NY, introduced the draft of the bill. Before the bill can be introduced in the House, it must first be voted on and pass the House Financial Services Committee.

Following the Guidance of CFPB

The Earned Wage Access Consumer Protection Act, as the bill is called, closely follows the advisory opinion given in December by the Consumer Financial Protection Bureau. At that time, the CFPB stated that earned wage access products do not resemble consumer loans and would not be protected under the Truth in Lending Act.

State Laws Covering Earned Wage Access

While there is no current federal law addressing earned wage access, some state laws have addressed the issue of whether earned wage access products are loans. Both Wisconsin and Nevada have passed laws that specify earned wage access products are not loans.

If a federal law on earned wage access passes, it would preempt any state laws on the subject matter.

Disclosures in Earned Wage Access Bill

According to the draft of the new federal bill, earned wage access would be a no-cost option and a disclosure would direct an individual on how to access this option.

There also will be disclosures that explain how much an individual could request each day or pay period or as a percentage of an individual’s total income through earned wage access, American Banker reports.

Proponents Applaud Draft of Bill 

Ian Moloney, Chief Policy Officer with the American Fintech Council, said he supports the proposed federal bill. 

“By establishing a national consumer protection framework and reinforcing that EWA is not a loan, this proposal recognizes the core principles of responsible EWA products and avoids forcing them into outdated lending laws that simply don’t fit,” Moloney said in a press release. 

The Financial Technology Association also supports the bill on earned wage access, noting that tens of millions of Americans rely on earned wage access to handle emergency and routine expenses.  

 “These products allow workers to access wages already earned, not future pay, to manage their cash flow responsibly,” said Penny Lee, President and Chief Executive Officer of the Financial Technology Association in a press release.

National Consumer Law Center Opposes EWA Products

But the National Consumer Law Center has come out as a strong opponent to earned wage access products equating them with payday loans.

“Earned wage payday loans exploit low-income workers and are designed to extract high fees from those who can least afford them,” said Patrick Crotty, Senior Attorney at the National Consumer Law Center in a press release. 

“The earned wage payday loan industry is rife with unfair, deceptive and abusive practices. Enforcement authorities should address those practices, and legislators should reject exemptions from interest rate caps and other consumer protection laws.”

Fees and Interest Costly To Consumers 

Lauren Saunders, Associate Director and Director of Federal Advocacy, at the National Consumer Law Center said consumers are losing hundreds of dollars a year by using earned wage access products.

“Earned wage payday loans drain consumers of $300 a year or more of their hard-earned money through interest, fees, and ‘tips,’” Saunders said.

“Unfair practices proliferate because these payday loans are intentionally designed to evade the legal definitions of ‘loans’ and ‘interest’ to dodge interest rate caps and other lending and disclosure laws.” 

The Bottom Line

A federal bill on earned wage access has been introduced in the House Financial Services Committee. The bill would govern earned wage access products and includes disclosure specifications for consumers.