Federal: Advocacy Letter 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. Our members are also improving access to financial services and increasing overall competition in the financial services industry by lowering the cost of financial transactions, allowing them to help meet demand for high-quality, affordable financial products. To that end, AFC has developed a specific set of standards for determining what constitutes a responsible EWA provider.

Responsible EWA providers, who constitute AFC’s membership offer crucial services for consumers to access their pay prior to payday in a way that makes the most sense for the induvial consumer’s situation. Nationally, our members have already assisted millions of consumers in ensuring that they are able to handle unexpected expenses when they inevitably come up before their next paycheck.

As astutely noted in your comments during an October 2023 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.4 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.

AFC continues to advocate for sensible federal standards that will assist the development of responsible emerging markets, like EWA. However, some states are attempting to classify this product as a loan, even though it does not match the characteristics of a loan product in practice. 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.

AFC supports the Earned Wage Access Consumer Protection Act because, if passed, it will implement a pragmatic, consumer-protected approach regulating the EWA industry that captures the nuances of the financial service in a manner that is consistent with AFC’s views. Namely, the bill recognizes the important distinction between EWA services and lending products by establishing clear definitions for what constitutes EWA services, creates functional disclosure requirements and consumer protections that fit the parameters of the service, and ensures that EWA services are not improperly subjected to legacy lending laws.

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,

Ian P. Moloney
SVP, Head of Policy and Regulatory Affairs
American Fintech Council