The American Fintech Council (AFC) has voiced strong objections to a proposed rule by the Consumer Financial Protection Bureau (CFPB) regarding Earned Wage Access (EWA) products. In a comment letter submitted to the CFPB, AFC argues that the proposal would misclassify EWA products as credit, overturning previous guidance from the CFPB and causing significant harm to consumers.
Phil Goldfeder, Chief Executive Officer of AFC, stated, "Simply put, responsible EWA is not credit, and should not be regulated as such. For nearly four years, earned wage access providers have built their businesses around the CFPB’s own guidance, enabling innovators to provide millions of Americans with safe, convenient access to wages they have already earned." He added that the proposed rule disrupts established precedent and threatens financial flexibility for millions of consumers.
AFC contends that the CFPB's process in classifying the new rule as interpretive rather than legislative bypasses standard procedures required for new regulations. The organization warns that this could lead to detrimental effects on consumers who rely on EWA services for short-term financial stability and impose significant compliance costs on providers, potentially reducing market competition.
EWA products differ fundamentally from loans as they do not involve interest or repayment obligations. They offer liquidity without traditional lending risks like debt cycles and credit penalties. AFC asserts that regulating EWA products under a framework designed for credit would disrupt their market by failing to recognize these unique characteristics.
Ian P. Moloney, SVP and Head of Policy and Regulatory Affairs at AFC, emphasized in their letter: "Consumers recognize EWA products as distinct from lending products... We urge the CFPB to withdraw its Proposed [Interpretive] Rule and instead defer to ongoing legislative considerations at both state and federal levels."
The AFC represents leading fintech companies and innovative banks with a mission to promote a transparent financial system through responsible innovation. The full text of AFC’s letter is available online.