Federal: AFC's Request for Bipartisan Passage of the Earned Wage Access Consumer Protection Act in Response to Committee Markup

The Honorable Patrick McHenry

Chairman

Committee on Financial Services

U.S. House of Representatives

Washington, DC 20515

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The Honorable Maxine Waters

Ranking Member

Committee on Financial Services

U.S. House of Representatives

Washington, DC 20515

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Re: The American Fintech Council’s Request for Bipartisan Passage of the Earned Wage Access Consumer Protection Act in Response to Committee Markup

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Dear Chairman McHenry and Ranking Member Waters,

On behalf of our members,¹  the American Fintech Council (AFC) writes to extend our support for the Earned Wage Access Consumer Protection Act and respectfully request bipartisan support of the legislation. 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 this emerging service that is providing financial options to millions of Americans.

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. As the premier trade association representing the largest EWA providers, AFC has worked to promote and advocate for industry best practices and consumer protections.

AFC’s mission is to promote an innovative, transparent, inclusive, and customer-centric financial system by fostering innovation in financial technology (Fintech) and encouraging sound public policy. AFC members are enabling 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.²

Simply put, Earned Wage Access (EWA) is not a loan and should not be regulated as such.³ EWA is a safe, reliable alternative to payday and predatory loans and gives consumers the ability to access the money they have already earned on their own terms. EWA services allow consumers access to wages for the work they have already completed as opposed to waiting for an arbitrary pay period. EWA does not charge interest or late fees and does not conduct collection activity of any kind. EWA services are offered in both employer-integrated and direct to-consumer methods. Importantly, all AFC EWA member companies offer a reasonable no-cost option that ensures employees can use their services without ever paying a cent to access their wages. Thus, workers are not at risk of being caught in the debt cycles that predatory products like payday loans have ensnarled them in for years.

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.⁴ Namely, the bill recognizes the important distinction between EWA services and lending products by establishing clear definitions.

Further, this bill provides strong consumer protections akin to those found in established lending laws, without subjecting EWA services to ill-fitting cost measures, such as APR. It is important to note that TILA does not require APR disclosure for $7 or less in fees when financing more than $75 – or $5 or less in fees on amounts less than $75⁵. This is not by accident and it’s because such small amounts of money should not be misleading portrayed as somehow large costs, especially compared to the high-cost products and strategies from which people use EWA as an alternative.

However, even if APR disclosure was required for the low fees charged by EWA providers, APR is an inherently confusing metric, especially when applied to a non-traditional transaction service like EWA. EWA provides consumers with clear and transparent disclosures of any fees they opt to accrue within a given transaction. Simply put, workers receive notice of the actual dollars and cents associated with their transaction, not a calculation that artificially obscures costs by annualizing a fee as a percent of the total amount of the requested transaction.

Lastly, the Earned Wage Access Consumer Protection Act is timely and builds upon the regulatory framework that has been created at the state level. In addition, this legislation provides clear legislative parameters and intent with which the Consumer Financial Protection Bureau can operate to craft functional regulations that are befitting of all EWA service models.

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 and respectfully request that committee members consider providing their support for the legislation as well.

Sincerely,

Ian P. Moloney

SVP, Head of Policy and Regulatory Affairs

American Fintech Council

Cc: The Honorable Bryan Steil, Representative, United States House of Representatives

The Honorable French Hill, Representative, United States House of Representatives

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¹ AFC’s membership spans technology platforms, non-bank lenders, banks, payments providers, loan servicers, credit bureaus, and personal financial management companies

² See AFC Standards for Earned Wage Access available at https://www.fintechcouncil.org/our-mission#standards.

³ See, AFC letter to the Consumer Financial Protection Bureau regarding developing a pragmatic regulatory framework for Earned Wage Access (Feb. 7, 2024), available athttps://static1.squarespace.com/static/6026acf418b9392d406b9977/t/65c3a66970411901578be40d/1707320937502/American+Fintech+Council+Letter+to+CFPB+on++Developing+a+Pragmatic+Regulatory+Framework+for+EWA.pdf and AFC letter to the Center for Responsible Lending and National Consumer Law Center regarding misleading statements and flawed methodology in Center for Responsible Lending’s Report on Earned Wage Access and National Consumer Law Center’s Endorsement, Oct. 23, 2023, available at https://static1.squarespace.com/static/6026acf418b9392d406b9977/t/653926fcefb1e840bd3fe1d8/1698244348723/American+Fintech+Council+Letter+Re+CRL+EWA+Report.pdf.

⁴ See AFC, Letter to Senate and House Committees in Support of Earned Wage Access Consumer Protection Act, Feb. 27, 2024, available at https://assets-global.website-files.com/65ffe2c368384b0aaeb608e2/65ffefc097fdea31bc144036_AFC%2B%2BProtection%2BAct%2Bto%2BHFS%2Band%2BSB%2BCommittees%2BFebruary%2B2024.pdf.

⁵ See the federal Truth In Lending Act, Regulation Z, § 1026.18(d)(2)(e) or see https://www.consumerfinance.gov/rules-policy/regulations/1026/18/#d-2.