Opinion was misused to claim that fintech payday loans are not “credit”

WASHINGTON, D.C. – The Federal Register yesterday published a notice that the Consumer Financial Protection Bureau (CFPB) issued a new Advisory Opinion that rescinded an Advisory Opinion issued in 2020 under CFPB Director Kathy Kraninger on whether certain employer-integrated earned wage advances (EWA) constituted “credit” subject to the Truth in Lending Act (TILA). The CFPB found that the 2020 Opinion’s analysis of what constitutes “credit” under TILA was “significantly flawed” and that the Opinion, which was limited to completely free advances, had been misunderstood and misused to support claims that EWAs are not credit.

In recent years, a new category of payday advance has arisen, sometimes offered through employers as an “earned wage access” product and at other times through direct-to-consumer fintech cash advance apps. Some employers cover the cost completely, but most of the time consumers pay fees such as expedite fees, so-called “tips” and “donations.” The industry claims that they are not offering credit and are not covered by TILA or state credit laws, including interest rate limits, despite annual percentage rates that often exceed 300%.

“The CFPB’s new Advisory Opinion addresses flaws in analysis and provides needed clarity to industry. This is an important move to ensure laws get properly applied and consumers get the protection Congress intended from predatory credit products,” said Nadine Chabrier, senior policy counsel and litigation counsel at the Center for Responsible Lending.

“Payday advances, however styled, are loans that must comply with our federal and state lending laws. The CFPB was right to rescind the 2020 Advisory Opinion that was wrongly being used by fintech payday lenders to claim that their loans are not loans,” said Lauren Saunders, associate director at the National Consumer Law Center. “Workers shouldn't have to pay to be paid, and these so-called earned wage advances are just payday loans in disguise."

Background

This new, 2025 Advisory Opinion states: “The CFPB is rescinding the 2020 Advisory Opinion for two fundamental reasons: (i) its legal analysis is significantly flawed in numerous respects; and (ii) it engendered substantial regulatory uncertainty.”

Regarding the flawed legal analysis, the CFPB cited the inadequacy of the consideration of the meaning of “debt” within the definition of “credit.” The 2020 Opinion failed to discuss the regulation implementing TILA and that terms not defined in TILA have the meaning given under state law.

On the issue of regulatory uncertainty, the CFPB emphasized the extreme narrowness of the 2020 Opinion, applying only to completely free, employer-integrated products. While few if any products met its scope, the opinion was cited in support of legal conclusions it did not reach. The CFPB explained: “For example, [the Opinion] has erroneously been cited for the general propositions that no-fee earned wage products are not credit, and that employer-partnered earned wage products are also not credit.” As examples of that misuse of the Opinion, the CFPB cited an advisory opinion issued by former Arizona Attorney General Mark Brnovich and a comment by EWA provider ZayZoom.

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The Center for Responsible Lending is a non-partisan, nonprofit research and policy advocacy organization working to promote financial fairness and economic opportunity for all, end predatory lending, and close the racial wealth gaps.

Since 1969, the nonprofit National Consumer Law Center® (NCLC®) has worked for consumer justice and economic security for low-income and other disadvantaged people in the U.S. through its expertise in policy analysis and advocacy, publications, litigation, expert witness services, and training.