WASHINGTON, DC – Today, the Center for Responsible Lending (CRL), the National Consumer Law Center (NCLC), and the Consumer Federation of America (CFA) released their joint comment letter to the Consumer Financial Protection Bureau (CFPB), which detailed their support and recommendations for the CFPB’s proposed interpretive rule for paycheck advance apps – credit products that are essentially fintech payday loans.

The consumer advocacy groups wrote, in part:

We commend the CFPB for affirming that paycheck advance loans, regardless of their characterization by lenders, are credit products subject to federal [price] disclosure requirements...

[We] applaud the proposed interpretive rule for affirming… that tips and expedite fees are finance charges...

We recommend:

  1. Amending the language of the proposed interpretive rule to include all direct-to-consumer fintech cash advances,
  2. Encompassing all advances of income, not just wages,
  3. Applying the rule to any advance of anticipated income, and
  4. Incorporating into the rule that some advances from employers are loans, not payments of wages.

As part of their section on data that show paycheck advance app users experience high levels of repeat borrowing, the groups wrote:

“With this cycle of reborrowing, consumers do not get liquidity to cover new expenses; instead, the advances merely fill the gap created by the prior advance. As a result, like traditional payday loans, paycheck advances create their own demand. And the cycle of reborrowing creates the same problems of financial instability.”

As part of their conclusion, the groups wrote:

We believe this rule will provide much needed clarity around the regulation of these credit products and give consumers the transparency in costs that they are entitled to but have been deprived of to date.

This comment letter from CRL, NCLC, and CFA supplements a separate letter, signed by over 160 groups, that also supports the interpretive rule.

Earlier this year, CRL published “Not Free: The Large Hidden Costs of Small-Dollar Loans Made Through Cash Advance Apps,” a report that features new data on this credit product.

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Press Contact: Matthew Kravitz matthew.kravitz@responsiblelending.org