Federal: Advocacy Letter to Rep. Steil in Support of the Earned Wage Access Consumer Protection Act

The Honorable Bryan Steil
U.S. House of Representatives
Washington, DC 20515

Re: The American Fintech Council’s Support of the Earned Wage Access Consumer Protection Act

Dear Representative Steil,

On behalf of our members, the American Fintech Council (AFC) writes to extend our support for the Earned Wage Access Consumer Protection Act. As we have noted, Earned Wage Access (EWA) is not a loan and should not be regulated as such. The Earned Wage Access Consumer Protection Act recognizes this fact by establishing a pragmatic, consumer protected approach regulating the EWA industry that captures the nuances of the financial service.

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by supporting the responsible growth of lending, fostering innovation in financial technology (Fintech), and encouraging sound public policy. AFC members are at the forefront of fostering competition in consumer finance and pioneering ways to better serve underserved consumer segments and geographies. AFC has publicly advocated for a clear and consistent regulatory framework for EWA that avoids duplicative or diverging requirements and accurately reflects the nuances of the financial service. Our members are also lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable financial products.

As astutely noted in your comments during the recent House Financial Services Committee hearing on modernizing financial services through innovation and competition, there has been a disconnection of work from reward in modern payroll industry that ultimately harms workers.

EWA services help to reconnect work and reward for the benefit of employees. EWA provides workers with a crucial service by enabling them to access the wages they earned between paychecks and helps to break the arbitrary pay period cycle.

Further, EWA helps workers avoid fees that are due to the arbitrary pay period cycle, such as overdraft fees and late fees. For example, data from an AFC member finds that the average amount of earned wages accessed by most consumers is about $115 to $150, once a pay period. Most users access their wages to pay bills that come with late fees, like utility bills, credit card bills, and childcare; and typically utilize one platform for about three months. While there are usually some small costs associated with EWA, at least one “no cost” option is offered by most EWA providers, such as through a debit card, or a next business day ACH bank transfer. A nominal fee of about $3 for instant delivery to any bank account is also common. Research by real-time wage access provider Daily Pay found that users see savings of $1,200 a year from overdraft fees or late fees not incurred. Through EWA’s low-cost services, workers no longer need to rely on high-cost alternatives, such as payday lenders. This allows workers to use more of their reward for working on supporting their families and contributing to the economy.

AFC continues to advocate for sensible federal standards that will assist the development of responsible emerging markets, like EWA. However, some states are looking to classify this product as a loan, even though it does not fit any definition of the features of a loan product. If adopted, this inaccurate and patchwork regulatory framework, will have significantly negative consequences for employees because it will improperly classify EWA services under legacy lender regulatory framework and limit the competitiveness of EWA providers. Ultimately, this will lead to the withdrawal of responsible EWA providers and other competitive services from the market. Passage of the Earned Wage Access Consumer Protection Act would ensure that these harms do not befall employees using EWA services.

AFC supports the Earned Wage Access Consumer Protection Act because it recognizes the important distinction between EWA services and lending products by establishing clear definitions for what constitutes EWA services, creating functional disclosure requirements and consumer protections that fit the parameters of the service, and ensuring that EWA services are not subjected to legacy lending laws. While AFC remains in favor of the consumer protection principles afforded by existing lending laws, we maintain that its provisions are ill-suited for application to EWA services as EWA is not a loan.

The pragmatic, consumer protected regulatory approach established in the Earned Wage Access Consumer Protection Act reflects the policy aims of AFC and, if enacted, will create a sensible federal standard for the EWA industry. In turn, this will ensure the continued development of responsible EWA services to employees and help to realign the disconnect between work and reward that pervades the modern payroll industry. Therefore, AFC and its members support this legislation.

Sincerely,

SVP, Head of Federal and State Policy
American Fintech Council