The Center for Responsible Lending, the National Consumer Law Center, and Consumer Federation of America commend the CFPB for affirming that paycheck advance loans, regardless of their characterization by lenders, are credit products subject to federal disclosure requirements. As written, the proposed interpretive rule by the Consumer Financial Protection Bureau regarding the applicability of the Truth in Lending Act (TILA) to paycheck advance loans confirms the applicability of TILA to paycheck advance loans frequently branded as “Earned Wage Access” (EWA).
In part I of this comment letter, we acknowledge our support for the proposed interpretive rule and discuss the procedural appropriateness of an interpretive rulemaking in this instance. Additionally, we discuss the need for a repeal of the 2020 Advisory Opinion. We present findings that show harms consumers face when using payday advances, affirm the applicability of TILA to paycheck advances, and set forth facts that support the legal definitions of credit and finance charges for paycheck advances. Finally, we discuss the importance of TILA disclosures for consumers.
In part II, we suggest clarifications of the proposed interpretive rule and its scope. We suggest the proposed interpretive rule be further clarified to ensure that it captures emerging models of earned wage products and fintech cash advance lenders that structure their credit product advances in ways that seek to exploit technical exceptions from federal law.
We recommend:
- Amending the language of the proposed interpretive rule to include all direct-to-consumer fintech cash advances,
- Encompassing all advances of income, not just wages,
- Applying the rule to any advance of anticipated income, whether or not “accrued,” and
- Incorporating into the rule that some advances from employers are loans, not payments of wages.