Federal: Joint Trade Comment Period Extension Request for EWA Interpretative Rule

July 19, 2024

The Honorable Rohit Chopra

Director

Consumer Financial Protection Bureau

1700 G Street, NW

Washington, DC 20552

Re:       Comment Deadline Extension Request for the CFPB’s Proposed Interpretive Rule on Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work [Docket No. CFPB-2024-0032]

Dear Director Chopra,

On behalf of The American Fintech Council (AFC) and the Financial Technology Association (FTA),^[1] we are writing you to request that the Consumer Financial Protection Bureau (CFPB or the Bureau) provide a 30-day extension of the comment period for its proposed interpretive rule on Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work (Proposed Interpretive Rule).

EWA represents a responsible and innovative alternative to payday loans that, where workers can safely and cost-effectively access their already earned wages without the mandatory fees, interest accrual, and harsh debt collection practices found in payday lending. Responsible EWA providers, who constitute our memberships offer crucial services for workers to access their pay prior to payday in a way that makes the most sense for the individual user’s situation. Nationally, our members have already assisted millions of workers in ensuring that they are able to handle unexpected expenses when they inevitably come up before their next paycheck.

This optionality in EWA products, while beneficial from a consumer and economic perspective, presents a unique opportunity to develop robust regulatory guardrails. To that end, we have publicly advocated for a clear and consistent regulatory framework for innovative financial services and products that avoid duplicative or diverging requirements and accurately reflect the nuances of this innovative service. In practice, companies have relied heavily on the Bureau’s previous 2020 Advisory Opinion to develop their services and create a robust market for EWA. Pursuing efforts that significantly shift the Bureau’s perspective on EWA services, as is done through the Proposed Interpretive Rule, could ultimately cause significant harm to EWA providers and the users they serve.

This optionality in EWA products, while beneficial from a consumer and economic perspective, presents a unique opportunity to develop robust regulatory guardrails that are specifically tailored to this emerging service. To that end, the undersigned associations have publicly advocated for a clear and consistent regulatory framework for innovative financial services and products that avoid duplicative or diverging requirements and accurately reflects the nuances of the innovative service. In practice, companies have relied heavily on the Bureau’s previous 2020 Advisory Opinion to develop their services and create a robust market for EWA. Pursuing efforts that significantly shift the Bureau’s perspective on EWA services, as is done through the Proposed Interpretive Rule, could ultimately cause significant harm to EWA providers and the consumers they serve.

As noted, the Proposed Interpretive Rule represents a significant shift in the CFPB’s position that requires due consideration by the public to ensure that the comments put forth comprehensively reflect the potential ramifications of the Proposed Interpretive Rule should it be finalized. Specifically, the Proposed Interpretive Rule classifies EWA services as “credit” under Regulation Z and applies specific finance charge and disclosure requirements to the EWA services. As stated by the Bureau, the Proposed Interpretive Rule stands in stark contrast to the Bureau’s previous interpretation related to EWA services by “replac[ing] the advisory opinion the CFPB issued in November 2020, which stated that some earned wage products are not “credit” because they would not constitute a “debt.””^[2] This replacement of an existing agency interpretation and expansion of the application of Regulation Z constitutes a significant change to the Bureau’s position and therefore requires additional time for consideration, which has not been afforded in the current Proposed Interpretive Rule’s 43-day comment period.^[3]

Further, largely due to the dearth of existing legal and regulatory argumentation related to EWA services, the Bureau draws on novel textual and legal arguments to legitimize its position within the Proposed Interpretive Rule. Setting aside the actual validity and potential impacts of these arguments, the simple novelty of their use to underpin the Bureau’s arguments within the Proposed Interpretive Rule constitutes an independent rationale for granting an extension of the comment period to ensure that the public has adequate time to consider these new and unique arguments and provide substantive comment upon them, as requested by the Bureau. Given the broader context regarding the lack of federal regulatory clarity in the EWA sector, a Proposed Interpretive Rule of this complexity and importance should not be rushed and commenters should have a full and fair opportunity to assess the proposal and provide informed feedback.

In light of the complexities and novelties identified above, we recognize the importance of ensuring the public, including industry participants, have adequate time to provide material comments to the Proposed Interpretive Rule. With this in mind, we respectfully request that the CFPB extend the comment deadline by 30 days to allow members of the public, including industry participants, to better ascertain the potential impacts of the Proposed Interpretive Rule and provide meaningful comments. Good governance practices dictate that the Bureau should provide his additional time to ensure that the comments they receive are sufficiently material and substantive in nature.^[4]

Sincerely,

Ian P. Moloney

SVP, Head of Policy and Regulatory Affairs

American Fintech Council

‍

Angelena  Bradfield

Head of Policy

Financial Technology Association

[1] American Fintech Council’s (AFC) membership spans EWA providers, lenders, banks, payments providers, loan servicers, credit bureaus, and personal financial management companies. The Financial Technology Association champions the power of technology-centered financial services and advocates for the modernization of financial regulation to support inclusion and responsible innovation, including in the context of EWA products that are helping thousands of workers avoid traditional high-cost and predatory alternatives while awaiting a paycheck.

[2] Consumer Financial Protection Bureau, Truth in Lending (Regulation Z); Consumer Credit Offered to Borrowers in Advance of Expected Receipt of Compensation for Work [Docket No. CFPB-2024-0032], Page 11.

[3] Recognizing the comment period deadline of August 30, the public has only been granted 31business days to submit comments.

[4] See, Administrative Conference of the United States, Agency Guidance Through Interpretive Rules, (Aug. 8, 2019), available at https://www.acus.gov/recommendation/agency-guidance-through-interpretive-rules.