AFC is committed to working with regulators to create standards for nascent industry that balances necessary consumer protection with critical access to financial services

Requests DFPI make important distinction that EWA is not credit and should not be treated as a loan

Sacramento, CA (May 25, 2023) – The American Fintech Council (AFC), the premier industry association representing responsible fintech companies creating critical access to safe and affordable financial services has responded to the California Department of Financial Protection and Innovation’s (DFPI) proposed rulemaking regarding earned wage access products and companies.

“Consumers should have access to wages they have earned when they need it.” said Phil Goldfeder, Chief Executive Officer of AFC. “When offered responsibly, EWA is a critical tool for families to avoid predatory financial products. We thank DFPI for their commitment to a comprehensive dialogue and urge them to design regulatory standards that recognizes the critical value of responsible and transparent companies.”

Earned wage access is an innovation that enables workers to access wages they have already earned without waiting for an arbitrary payday. According to the Financial Health Network, EWA is a rapidly growing and popular employee benefit. In 2020, there were 55 million EWA transactions and $9.5 billion in earned wages facilitated, and about 15 percent of employers offer EWA as a benefit to their employees.

In their letter to DFPI, AFC highlighted that EWA is not a loan and should not be treated as credit. EWA requires no credit checks, does not incur late fees or penalties, is non-recourse, and does not impact a user’s credit score. The amount of the transaction is later deducted from the employee's paycheck or debited from an employee’s account. AFC urged the DFPI to consider these criteria to ensure that critical protections for the consumer remain intact and that the product remains safe and affordable.

“Industry survey data demonstrates that EWA, for example, helped consumers avoid and replace payday loan fees, bank and credit union overdraft fees, bill late fees, and loan payment late fees,” wrote AFC in their comments. “This is why we strongly believe that allowing workers to access their wages early is an option that California consumers deserve. Any data analysis related to EWA should take into account these important savings, as well as other key features, like low fees and costs compared to traditional lending products.”

If you have any question or to reach AFC please email info@fintechcouncil.org

Read the full letter here.